For any business, access to working capital is essential – not just to maintain regular operations – but to take on larger clients projects and act on growth opportunities. However, when capital is tied to unpaid client invoices, cash flow can become strained and in severe cases even making payroll can be a struggle. Fortunately, there are two ways to leverage receivables in order to improve cash flow, create a source of working capital, and reduce the need for loans during uneven revenue cycles.
One of the biggest issues facing businesses today is that projects and orders occur at a faster rate than payments on invoices. For small businesses, manufacturers, and construction companies, covering overhead costs and completing large projects can be an uphill battle when invoices are on staggered payment schedules of 30 days or longer. Factoring services eliminate long waiting times due to staggered schedules by converting unpaid receivables to working capital in as fast as 24 hours. This greatly improves cash flow and creates a much better parity between the point at which an invoice is generated and the ability to access cash from the sale. By using factoring, businesses can accumulate the capital necessary to cover overhead expenses and to take advantage of growth opportunities.
Asset-Based Lines of Credit
Another way to leverage receivables for working capital is to get an asset-based line of credit. With an asset-based line of credit, items such as equipment, inventory, and receivables are evaluated, and a revolving business line of credit is created. The line of credit can be accessed as needed for anything from small purchases up to larger transactions. The interest-only line of credit gives businesses the capital they need to smooth out cycles and cover expenses instead of waiting over a month for customers to pay their invoices. The spending limits on asset-based lines of credit can increase as your receivables and inventory grow.
Talk to the Experts
Derix Capital Finance specializes in working capital solutions. We provide the most flexible and comprehensive programs for both factoring and asset-based lines of credit. If you are tired of struggling through uneven revenue cycles, or you simply want to improve your cash flow to prevent any issues down the line, talk to the experts at Derix Capital Finance today.