Cash Flow Requirements

For seasonal businesses, there may be a requirement to invest up front, on the understanding that revenue will follow afterwards. This could be getting ready for a busy sales period or filling up a schedule for appointments and services. There may also be a need to temporarily expand the workforce in order to be ready on time. Although the income will be received in the future, staff payroll and other costs need to be paid in a timely manner. Unpaid invoices, or accounts receivable, are an asset yet to be realized, and it can be difficult for a business to plan without adequate cash flow. By factoring unpaid invoices, the business can receive a large portion of the unpaid invoices almost immediately. One of the big advantages of invoice factoring is that the factoring company then takes on the responsibility of following up on the unpaid invoice to collect the money. This saves time and potentially stress for the company looking to use invoice factoring to free up cash as it is needed.

Debt-free solution

Invoice factoring does not incur debt. Whereas a loan can mobilize funds by borrowing money that then has to be repaid, the invoice factoring transaction is complete once the accounts receivables are processed. The transaction is the sale of an asset – the invoice to be paid in typically 30, 60, or 90 days.

Freedom to use the money in a different way

When applying for a loan, it is common to be required to explain exactly how the money will be used. In processing the loan application, the lender can then choose to approve or not. Once secured, the money is then designated to be used in a particular way. One advantage of invoice factoring is that the transaction frees up cash that was locked in an unpaid invoice, with no stipulation to use those funds in a specific manner. This means that as unforeseen challenges or exciting opportunities evolve over time, the money can be diverted in the best interests of the business.

Showcasing real-life scenarios

Example 1: A store selling toys is expecting a particularly busy sales window in December. The store may choose to open longer hours and supplement the staffing with either increased hours for existing staff or temporarily hiring extra people to cope with increased traffic. Factoring invoices to improve cash flow could help fulfil payroll commitments, knowing that investment up-front will likely be rewarded with increased sales during a busy time in-store.

Example 2: A farmer preparing to harvest a crop. Before being able to realize income from the sale of the crop, there are logistics that could include investing in new equipment or hiring extra staff to manage the harvest. Invoice factoring can help bridge the gap between the time before the harvest to the time when produce can be sold, smoothing out cash flow across times that are inevitably busier.

Turn Unpaid Invoices into Working Capital

When cash flow is tight, waiting 30, 60, or even 90 days to get paid can put your business at risk. With Accounts Receivable Factoring from Catamount Funding, you don’t have to wait. We turn your unpaid customer invoices into fast, flexible funding, without taking on debt or giving up control of your business.