small business invoice factoring

How to Avoid This One Thing That Dooms Small Businesses

If you own a small business, you are one of the 28 million Americans who are helping to drive the economy with hard work and innovation. According to the 2010 Census, approximately 120 million people across the nation are employed by small businesses, which are defined as organizations with under 500 employees. These businesses take hard work and grit to sustain, often without much help; the United States Small Business Association Office of Advocacy reports that roughly 70% of small businesses are run by just one person. This entrepreneurial spirit is the lifeblood of our country.

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Without the luxury of the comfortable cash cushion afforded to large corporations, small businesses, even ones that are extremely profitable, can find it hard to stay above water. As a result, only roughly 50% of all new businesses last at least five years, and only about a third make it past a decade, according to the U.S. Bureau of Labor Statistics.

What is it that dooms these otherwise highly successful businesses?

Usually, it simply comes down to issues with cash flow. Customers often have 30, 60, even 90 days to pay an invoice. While this revenue is essentially guaranteed, the waiting period can present an existential threat to lean companies without much of a safety net. To make matters worse, clients pay almost 60% of invoices behind schedule. Unfortunately, these delays can sometimes be fatal.

The solution? Business invoice factoring.

What is invoice factoring? Business invoice factoring is when a third party pays most of the accounts receivable to a company so that around 80% of the client’s invoice is available for use immediately. The remaining 20% or so is paid once the client has fulfilled the invoice, minus whatever fee the factoring service charges. This expedited cash flow can be absolutely essential to the survival of small businesses. Possibly the greatest advantages small businesses possess is the ability to evolve and adjust to changing conditions. With the improved cash flow provided by business invoice factoring, these businesses can acquire the capital necessary for such adjustments.

If your small business is suffering from slow-paying invoices, be sure to visit Eagle Business Credit to look into invoice factoring solutions.

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