Business Finance Strategy To Increase Cash Flow For Small Businesses
Before the market imploded, every other commercial on television was for competitive
lending practices with the premise of banks competing to offer the best rate and terms for loans to small and mid-sized companies or individuals. Well, that no longer exists as balance sheet losses pile up and banks keep a tight leash on credit. In response, many small and mid-sized businesses have turned to alternatives strategies to source capital needed to grow their business.The Receivables Exchange, allows small and mid-sized businesses to sell their accounts receivable to investment entities that compete in real-time to purchase those receivables, giving the business the control rather than the financing institution. By using receivables finance, these companies can quickly increase their cash flow and take control of their working capital.
To get started, selling receivables on the Exchange, a business must complete an online application and provide company information including financials which is then sent for validation and approval. Once approved the Seller pays a one-time fee to join and can list as many invoices as he wants to sell as long as the total value of the invoices in the auction meets the $10,000 minimum.
The Seller then creates the auction, determining how long the auction will last (3-10 days), the minimum advance amount he will accept, and the maximum discount fee he will pay.
A bank loan comes with myriad terms and conditions that can stifle the creativity and ingenuity of a small to mid-sized business and limit their spend flexibility including what the loan can be used for.
By using an online receivables auction marketplace to sell your outstanding invoices, the business can free up valuable cash and take the calculated risks that are all too often a matter of success or failure. The majority of business don't fail because of lack of a good idea, they go under because they lack sufficient cash flow.
For example, a business owner has an idea for a new product to add to his inventory but it requires a significant amount of cash up-front. The bank thinks it is a poorly designed or impractical product making it too much of a risk.
They won't lend money if they think for a minute that they won't recoup their funds. Being able to gain access to that capital fast and at a price points within your control, allows the business the flexibility to take advantage of these opportunities. If it fails, the business isn't stuck with monthly loan payments.
Pumping cash into a business gives it the fuel needed for growth and the receivables auction process allows the business to better manage its cash flow enabling it to control its own destiny. This process is fairly simple and painless. There are fees, but when compared to the prospect of having to host a "going out of business" sale, these fees seem nominal plus, the Seller has a say in what he pays the Buyer.
Being aggressive about small business cash flow translates into growth and opportunity. To compete and thrive, capital is necessary to add new equipment, build inventory, add employees and expand the business. The Seller has goods or services (invoices) and the Buyer has capital (cash). The online receivables exchange is a meeting ground for the two to come together and make a deal. And because there is a global network of Buyers bidding, the Seller can get a competitive cost of capital.
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