Unfortunately, being paid late as a result of unpaid invoices is a huge problem, especially for small and middle market businesses.
What’s worse is that this problem not only affects the business involved, but the entire micro-economic system in place.
Studies show that when a business is unable to pay an invoice or pays late, they are forced to take dramatic steps that negatively impacts every facet of the company.
This can include salary, promotion and hiring cuts, as well downsizing equipment and marketing investments.
Beyond that, most businesses are unable to move forward with new orders due to a lack of upfront funding, which then creates a long lasting and uncertain future for the brand.
Luckily there is a financially responsible way to avoid these potentially disastrous results. Accounts Receivable or AR Financing is a great alternative means of providing fast working capital to businesses. It uses accounts receivable as a basis for financing and provides business owners, CEOs and CFOs with a safe and predictable cash flow in times of need.
This source of funding comes from a company’s Accounts Receivables (invoices) and is immediately advanced to the small business. Holding no risk to the company, even businesses that are unsuitable for bank loans may qualify. This is due to the fact that this kind of factoring depends on the strength of the clients’ customers credit, not the client itself.
Accounts Receivable Financing allows the businesses to get much-needed cash for working capital, which allows them to smooth out cash flow mismatches and enables them to focus on their core business without being burdened by continual short-term funding constraints.
Another beneficial alternative is to utilize PO Financing—also known as Purchase Order Financing. In this case, a financing company works in conjunction with a company’s supplier, helping commit advance funds on delivery of finished goods, thereby giving suppliers assurance that they will be paid in time, every time.
Beyond the benefits of a strong and thriving business, research shows that if a small to middle market business owner is able to pay invoices on time, they can use the profited funds towards useful additions to their company such as new equipment, employee pay increases, and investments towards marketing and inventory.
Overall, for the health of small or middle market businesses, it’s extremely important to consider alternative sources of funding. By doing this, the company can focus on their clients, employees and improving their bottom line.