As a business owner of a growing company, it's essential to have enough working capital to support your operation. Finding the most appropriate type of borrowing base to finance your business expansion can be a challenge. Two options on the table are cash flow from A/R and bank loans. To make the most informed decision it’s important to have all the facts about both.
Cash Flow from AIR
Use your current A/R or invoice factoring as a source of cash flow. This process is where a third party, or "factor,” takes your current invoices and bills your clients as you normally would. By outsourcing your A/R collection management, you can get payment immediately to fund your growth. Your clients can pay in 30/60/90 days but you have access to that capital at a much faster rate than you previously had.
Bank loans are nothing new or innovative, but a very common source of capital for many companies. The approval process can take months—and it’s based on your company’s operational and credit history. New companies can be unlikely to secure approval for bank funding because of a lack of business credit or issues with payables in the past. Bank loans can also add debt to your balance sheet.
3 Key Advantages to Invoice Factoring vs. Bank Loans:
- Automated Cash -- Invoice factoring can be accomplished almost instantly with technology, whereas bank loans often require weeks for approval. This means you’ll have cash flow ready to fund your immediate expenses and back office technology you can rely on to build your business without increasing your overhead.
Focus on Accounts Receivable -- By focusing on your accounts receivable instead of credit, your access to capital is based on the creditworthiness of your clients, not your business.You have already done the hard work and invoiced your clients, factoring gives you access to the cash you’ve already earned - faster. Banks require a great deal of documentation to support your ability to repay a loan, like years worth of business plans and financials. Banks put the credit rating scrutiny on your business and make it extremely challenging if you are a new startup venture.
Secure Working Capital - Not Debt -- Bank loans add debt to your balance sheet. Invoice factoring provides you with immediate usable income that your company needs for growth, for payroll, or even for debt payments, without saddling your company with further debt or long-term obligations.
Expert Service from BAM
If you are interested in a dynamic and versatile option for improving your company's cash flow, contact BAM for a solution that's tailor-made for you. We want you to keep growing, and we’re here to help you do just that. Contact us today for more information about our services.