Recently I’ve been writing about different ways that small business can increase their cash flow, with strategies that vary from bartering with other companies to turning away slow/no pay clients Digital marketing consultant for small business . In this article, I explore some more adventurous alternative ways that small business owners are discovering for avoiding the cash flow crunch.
Adventurous Ways to Avoid the Cash flow Crunch
The methods I discussed in my recent writing are fairly common sense and standard; ask any good accountant and you’ll get some, if not all, of these suggestions. The two methods I cover in this article are less standard, and you may or may not have heard of them. Even if you have heard of them, you may not have considered them as viable options for you. But with the economy being the roller coaster that it is right now, you may want to keep your options open. So what are these two adventurous options?
– Factoring
– Creating Multiple Streams of Income
Here’s an overview of these two options so you can start wrapping your mind around them.
Factoring
The word “factoring” doesn’t give you much detail about this option, but it can give your business a boost if you are suffering from constipation in the cash department. With factoring, you sell your accounts receivable to a factoring company, which is usually a bank or a commercial finance company. When you sell your company’s receivables, you get cold hard cash. It is then up to the factoring company to collect cash from the clients who owe money.
The good news is that factoring is becoming more popular and more possible for small business. Previously, if you small business owned less than $10, 000 in accounts receivables, a factoring company would not consider working with you. These days, factoring companies are willing to be more flexible. According to the president of one factoring company, only three percent of all small business that are eligible for factoring are even aware that this is an option to generate cash for the business.
Now for the bad news. As with any finance option, you pay a price for getting cold hard cash. The average fee is 5% per month of the total receivables amount, and the factoring company may not accept receivables with payment terms of longer than 90 days. In addition, you run the risk of angering clients if the factoring company resorts to harsh measures to collect their cash. Factoring gives you a definite cash option that you may want to consider, depending on how strapped your small business is for greenbacks.