How to fund an expanding business with cash flow problems? (Views: 12389)
Wed, 02 Oct 2013
Growth is a sign of a healthy business. Sometimes however, rapid growth can lead to cash flow problems for a company. Case in point: if the customer base is increasing so fast that new equipment must be purchased or new staff must be hired sooner than the older customers can pay their current bills, the business might not have enough cash on hand to expand its operations and meet the new customers’ needs. This company is therefore faced with the choice between finding external funding and missing out on important growth opportunities. Most will want to avoid the latter.
Simply put, factoring is the process of selling a company’s accounts receivable to a financial institution. In exchange, part of the receivables can be advanced to the company: providing it with the cash needed for its expansion. Collection services will also often be provided by the financial institution to ensure that the company can concentrate on its business and not on chasing payments. Finally, factoring is a great tool for expanding companies since it does not come with a credit limit and provides a smooth transition to more traditional loans. Because factoring grows with your accounts receivable, you will be able to continually respond to your company’s expansion until its capital base meets your bank’s loan requirements. According to Brian Birnbaum, president at Liquid Capital America, expanding businesses use factoring for an average of two to three years before going to the bank for a loan.
Liquid Capital is a North American finance company founded in 1999 which offers all three types of funding. One of their main advantages is that unlike most large factoring companies, their franchise structure means clients talk directly to the decision makers and are therefore provided with much more personalized services. You can view their funding programs by clicking on the links above or find additional funding opportunities by using Fundica’s funding identification tool.
So where does a company find funding for a rapidly expanding, cash-strapped business? Unfortunately, many young companies find it difficult to meet bank funding requirements due to their almost non-existing credit history and small capital base. Consequently, these companies must look for solutions beyond traditional loans or margins of credit. Factoring (or accounts receivable financing) is one such solution.
Simply put, factoring is the process of selling a company’s accounts receivable to a financial institution. In exchange, part of the receivables can be advanced to the company: providing it with the cash needed for its expansion. Collection services will also often be provided by the financial institution to ensure that the company can concentrate on its business and not on chasing payments. Finally, factoring is a great tool for expanding companies since it does not come with a credit limit and provides a smooth transition to more traditional loans. Because factoring grows with your accounts receivable, you will be able to continually respond to your company’s expansion until its capital base meets your bank’s loan requirements. According to Brian Birnbaum, president at Liquid Capital America, expanding businesses use factoring for an average of two to three years before going to the bank for a loan.
Beyond factoring? In addition to accounts receivable financing, other funding solutions exist for high growth companies with cash flow problems. For example, businesses can increase their cash flow by reducing the burden of new equipment purchases by leasing equipment. Advances can also be obtained for predictable income such as the scientific research and experimental development (SR&ED) tax credit through SR&ED tax credit financing.
Liquid Capital is a North American finance company founded in 1999 which offers all three types of funding. One of their main advantages is that unlike most large factoring companies, their franchise structure means clients talk directly to the decision makers and are therefore provided with much more personalized services. You can view their funding programs by clicking on the links above or find additional funding opportunities by using Fundica’s funding identification tool.
Leave a comment
Please complete empty fields.
1
david moore ():
2 david moore ():
If you find yourself reaching the end of your overdraft facility, but there are still creditors to pay then you might be surprised to know that there is a solution. Contact us for more information. We are providing best solutions according to your ne
2 david moore ():
If you find yourself reaching the end of your overdraft facility, but there are still creditors to pay then you might be surprised to know that there is a solution. Contact us for more information. We are providing best solutions according to your ne
