Texas Small Business Factoring

Written by Patricia Tunstall
Bookmark and Share

Small businesses are particularly vulnerable to fluctuations in the economy and to the vagaries of their customers' invoice payments. Usually undercapitalized, these small enterprises must often rely on loans and other conventional financing for survival. What happens, however, to the small business that does not meet the criteria for bank loans?

Many startup and small businesses cannot meet the standards set by financial institutions for loans of any size. Without working capital, and with an erratic cash flow, these ventures fold because they cannot obtain adequate financing. Factoring, or accounts receivable financing, can provide these businesses with cash advances that provide as much or as little cash flow as they need at different times.

Sales and Expenses

Ironically, a business may show a continuing increase in sales and still be forced to close its doors. Why? Any owner knows that sales may be up, but unless accounts receivable and inventory are controlled, profits will be nil. Cash flow is stopped or unsteady if the company has too much tied up in unpaid invoices--money it is owed--and products sitting on shelves.

With small business factoring, a business in this predicament receives instant cash for its accounts receivable, thus freeing up cash and turning the collection worries over to a factor who assumes the risk. This factor--a bank or factoring company--then assumes the risk of customers' unpaid invoices. With the ability to choose to factor a few or many accounts receivable, a small business can regulate its own cash flow to its advantage.

Bookmark and Share