For new and small businesses, the slightest hold up in revenue can cause operations to grind to a halt. Something as simple as making payroll can become a huge challenge when revenue is tied up in unpaid client invoices. Overcoming financial obstacles can be very easy if you know what to do.
Handling Low Cash Reserves
New businesses typically start out with capital reserves to handle overhead costs until sales start coming in. However, sales can be through the roof, but that doesn’t guarantee a healthy cash flow. There comes a time when cash reserves are depleted, invoices are unpaid, and making payroll may mean having to take out a short-term loan. Unfortunately, using short-term loans can cause more headaches further down the line. Short-term loans do not guarantee the same issues won’t arise in the future. The only difference is that if a business uses a short-term loan to cover regular expenses such as making payroll, winding up in dire financial straits will be compounded by the debt of the loan. Borrowing money while waiting for revenue can quickly turn into a vicious cycle that can land a business in bankruptcy in a very short period of time.
Boosting Cash Flow & Making Payroll
Taking on debt through loans is not the answer to overcoming cash flow issues. If revenue is tied up in unpaid client invoices, even a short waiting period like 30 days can seem like forever, as expenses keep racking up. Instead of using loans and compounding expenses with debt, savvy business owners are using invoice factoring. Invoice factoring is a simple method by which unpaid receivables are quickly converted to cash. Instead of waiting on staggered payment schedules, businesses can access revenue within 24 hours. Making payroll and meeting other financial obligations become a thing of the past. In fact, many businesses use invoice factoring to build up cash reserves so they can focus on growing and making more sales, instead of worrying about whether there is enough capital to cover overhead expenses.
FSW Funding is a leader in factoring solutions for a number of industries throughout the United States. Whether you are just starting out as an entrepreneur, or you are looking to expand your business, contact the experts at FSW Funding and learn how invoice factoring can help overcome cash flow issues without saddling your company with debt.