Small businesses like trucking companies, freight brokers, contractors, and staffing companies hire millions of people. Even though they play an important role in the economy, they face many obstacles to success. One of the biggest problems small business owners face is cash flow, much of which is caused by delays in the payment of invoices. Invoice or money factoring companies offer a way out of this dilemma by advancing payment for invoices to qualified businesses.
Small businesses and cash flow problems
Small businesses play an important role in the economy. They are defined as businesses that employ fewer than 500 people. There are around 28 million small businesses in the U.S., accounting for 99.7% of all businesses in the country. They can be staffing agencies, trucking and freight agencies, government contractors etc. They play a necessary and important role in the economy, but face some significant challenges.
Cash flow problems are one of the most important causes why businesses fail. A study by U.S. Bank found that it accounted for business failure in 82% of all cases. For small businesses, unpaid invoices are the primary cause of cash flow problems. As many as 60% of all invoices are not paid on time. In many cases, this forces the business owner to take out loans just to be able to meet operating costs.
How money factoring companies can help
Cash flow problems due to unpaid invoices can lead to problems with day to day operations. They can also block plans for expansion and growth. Researchers have estimated that if all invoices due to U.S. small businesses were paid on time, they could collectively hire another 2.1 million more people, reducing unemployment by 27%.
Invoice factoring services can help small business owners to surmount their cash flow problems by advancing cash payments for invoices due. Small business invoice factoring turns invoices that are due within 90 days into instant cash. Most small business factoring companies pay 80% of the invoice up front and the remaining 20% when the invoice is paid by the client. They do charge a fee for this service, which can vary from 0.5% to 5% per month of the total value of the invoice.
How to find the best invoice factoring service
When it comes to finding a money factoring company, a personal relationship of trust is a necessary foundation. Money factoring companies that specialize in working with trucking companies and freight brokers really understand their situation and needs. Once they have verified the creditworthiness of a business, they can offer lines of up to $100 K.
Integrity and customer service are also important considerations when setting up invoice factoring. Money factoring companies sometimes specialize in serving specific industries, like freight and trucking or staffing agencies.
Money factoring companies can help small businesses surmount their cash flow problems. By advancing cash against unpaid and due invoices, they allow business to continue their daily operations or to carry out expansion plans and to hire more people.