From time to time, small businesses can run into cash flow issues. This is not something new, as most companies in the growth phase go through it. But if the issue is not addressed, the company may have to stop operations. The only way to deal with this is through financing. The two most common financing solutions that can help are invoice factoring and lines of credit.
At times, the payment terms offered to clients can be the source of cash flow issues in a business. For instance, some terms give clients even 60 days to pay debts. The problem is that a small business cannot afford to wait for two months to keep growing.
Invoice factoring allows a business to sell its invoices and get the cash it needs to keep running. After selling your invoices to the factoring company, you receive immediate payment.
Your business will receive invoice financing in two installments. The first installment payment is 85% of the amount you ought to get. You will receive the remaining 15% once the client pays what they owe. Get to know whether invoice factoring is right for your business before opting for this option.
Business Line of Credit
A line of credit operates similarly to a credit card. The credit line has a maximum limit that you can draw from. Anytime you have expenses to pay, you get money from the credit, but it also lowers the available credit. But when you repay the money you had borrowed, your credit limit goes back to the original figure.
Lenders give lines of credit depending on three things: cash flow, collateral, and credit. They expect your company to have enough collateral to secure the financing you need and the cash flow to repay the money. Also, a line of credit has certain terms that you need to adhere to if you want the credit line to remain operational. Lastly, a line of credit can be secured by personal and corporate assets. Again, analyze the needs of your business and see whether a business line of credit is the right fit for you.
If you are struggling with cash flow in your company, contact Critical Capital Solutions. We provide different financial products ensuring that businesses can keep going. Give us a call, and we will be happy to serve you.