Monthly Archives: July 2019

tax-new-century-financial

Why Your Business Should Obtain a Certificate of Good Standing

Of all the certificates and awards that businesses can seek and show off to the world at large, a Certificate of Good standing is the one that is commonly overlooked. If a business is in good standing, that certificate proves that the organization is in compliance with taxes and state laws. However, a Certificate of Good Standing has offers many other benefits to businesses of all sizes and in all industries.

How Does a Business Get a Certificate of Good Standing?

A Certificate of Good Standing may also be called a Certificate of Status, a Certificate of Existence, or simply Tax Compliance. These certificates are issued in the state where your business exists. In many cases, businesses can obtain a Certificate of Good Standing by filling out a form and paying a small fee. While the guidelines may vary from state to state, the information businesses need to submit includes:

  • The company name, as used for taxes

  • The formation date

  • The location of the business, including its home state

  • Registered owner’s name and address

  • Federal tax identification number

  • Unemployment insurance number

Most certificates of good standing last for 30-90 days, depending on state laws, to prevent businesses from presenting outdated information.

How to Use a Certificate of Good Standing

A Certificate of Good Standing is required when businesses want to establish themselves in states other than where they were formed. Additionally, the certificate helps businesses obtain financing, permits, licenses, and conduct large transactions.

Keeping in Good Standing

In order to maintain the status of good standing, your business must be in compliance with state taxes and laws. Registration, licenses, permits, reports, fees, and taxes must all be filed on time. Missing a deadline can place your business in bad standing with the state, which could lead to hefty fines at the very least, and complete dissolution of the business at the more severe end of the scale.

While obtaining a Certificate of Good Standing is rarely discussed among business owners, the advantages it offers to small and growing organizations are very important to long-term success.

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Rethinking the Cash Flow Model in a Faster Economy

The rate at which the world does business is much faster than it was only a few years ago. However, we still operate on receivables with staggered payment schedules of 30, 60, and even 90 days. While the standard practice of staggered payment schedules is not going to disappear anytime soon, there is a way to speed up cash flow and get faster access to revenue.

Cash Flow Issues

One of the biggest hang-ups with the traditional model is that businesses regularly experience cash flow issues. When invoices are on staggered payment schedules, businesses have more money going out from their accounts than coming in, at any given point. An unbalances cash flow can lead to uneven revenue cycles, trouble making payroll, the inability to purchase supplies and materials, and much more. Waiting while revenue is tied up in unpaid receivables can create a negative cash flow for businesses, which can lead to even worse problems.

Loans Don’t Solve Cash Flow Issues

Businesses used to turn to short-term loans to temporarily correct cash flow issues. However, taking on debt may exacerbate cash flow issues, especially if they are recurring. Uneven revenue cycles are compounded by loans, and many businesses find themselves in a financial hole as revenue trickles in and then immediately gets used to pay off debt every month. There has to be a better method.

Accounts Receivable Factoring

Accounts receivable factoring is a much more efficient approach to the traditional cash flow model. Factoring allows businesses to get access to revenue by converting unpaid receivables to cash within 24 hours. Factoring speeds up cash flow and eliminates the need to use short-term loans to correct issues. Factoring is used by businesses to ensure a constant flow of revenue to cover overhead expenses, make payroll, and take advantage of growth opportunities.

New Century Financial is a national leader in accounts receivable factoring and cash flow solutions for businesses. We offer the most comprehensive program for factoring, which we can tailor to your needs by letting you choose which invoices, or parts of invoices, get factored. Contact our offices to speed up your cash flow today.

How Factoring Compares to Loans and Merchant Cash Advances

There are a number of small business financing options available today. Among the most popular are loans, merchant cash advances, and factoring. Smart entrepreneurs will do research to see the pros and cons of each in order to make a careful cost analysis for both short and long-term payoffs. At New Century Financial, we took a look at loans and merchant cash advances to see how they stack up with our factoring services.

Business Loans

Business loans provide capital, typically for a specific use. In exchange for capital, loans require businesses to put up collateral, take on debt, and take a hit to their credit ratings. Loans are single-use funding products, so when the capital is used up, businesses are left with a balance that must be repaid according to a schedule outlined in the agreement, and if further funding is needed, a new loan must be taken out. Interest rates on loans are also subject to rate hikes by the Fed, which are becoming more common.

Merchant Cash Advances

A merchant cash advance, or MCA, is marketed as an infusion of working capital with a flexible payment structure. No debt is placed on the balance sheet and businesses get to preserve their credit ratings. On the surface, merchant cash advances look like a much better alternative to loans, but the devil is in the details. MCAs are repaid from a small percentage of credit card sales, so if the balance is not completely repaid by the end of the terms, businesses can face very large balloon payments. Additionally, merchant cash advances have hidden fees and interest rates that are typically higher than even traditional loans.

Factoring

Invoice factoring offers a number of benefits without any of the disadvantages of either loans or merchant cash advances. Factoring is structured around receivables. When businesses issue invoices with payment schedules of 30 days or longer, factoring can convert those receivables to cash within 24 hours. There is no debt involved, and businesses get to preserve their credit ratings. Because factoring is a simple exchange of receivables for cash, there is no need for collateral, and there are no payment plans, ongoing fees, or hidden penalties. The entire process is completely transparent and allows businesses to customize their factoring plan, giving them much more control than other financing programs.

New Century Financial offers the best factoring services. Businesses who use our factoring services get to choose which invoices are factored, and there are no contracts or hidden fees. Contact New Century Financial today and break away from restrictions of loans and merchant cash advances.