There are many businesses around today whose profits come largely from the payment of outstanding invoices. Even retail locations, which handle a great deal of money through point of sales, may have a significant amount cash tied up in invoices. Any way that a business legally makes money is a good thing, but there are certain disadvantages when having a significant amount of money contingent on the payment of invoices. One of the main problems that comes up are slow paying clients.
Required Operational Cash
Because a business may have a great deal of money tied up in expenses as it relates to the resources needed to create quality products and services, the payment of invoices may be crucial to a business continuing to thrive. In addition, the expenses of day-to-day operations, such as paying employees is also important money that often comes from the payment of outstanding invoices. When these clients holding invoices don’t pay quickly, problems begin to arise.
Turning a Difficult Situation Into an Opportunity
Fortunately, spot factoring is a way that businesses can sidestep the difficulties faced with clients that don’t pay in a timely fashion. Spot factoring allows a business to take outstanding invoices and use those invoices to get immediate cash. The factor or the invoice lender provides the loan, charges fees and interests and usually pays anywhere from 70% to 90% of the invoice.
How the Process is Carried Out
Once the client with the outstanding invoice has paid, the business then pays any fees, interests and the principal payment for the loan. If a business has multiple outstanding invoices, this type of financial transaction can happen many times in a given month or year. In fact, many businesses that suffer from slow to pay clients use factoring as an every day occurrence in order to give the business the operational cash it needs.
If your business is suffering from slow to pay clients, the cash you need doesn’t have to be out of your reach. With spot factoring, your business can have a quick, efficient and convenient method of getting the the cash needed and not having to be held up by customers that don’t pay their invoices quickly enough.