Inflation is everywhere in the news, and while there are a number of unrelated events converging to impact the economy, businesses are usually the first to feel the effects. Fortunately, there is a way for companies to insulate themselves against the full impact of inflation and continue to thrive.
Why Inflation Is in the News
The inflation that businesses are starting to feel now started back around 2018. Washington, DC threatened to place tariffs on international trade, causing businesses to over-buy goods and raw materials. When those tariffs turned out to be more bark than bite, there was a surplus of products in the market. Shipping companies and carriers could not negotiate the rates they needed to thrive, and many shuttered in 2019. Immediately following, the country experienced a pandemic, causing more businesses to file for bankruptcy. Consumer demand skyrocketed, putting further pressure on supply chains. PPP loans were issued to companies to offer financial assistance with full forgiveness. Now in 2022, the economy is attempting to right-size itself and correct for errors from the past four years. The result is higher prices, limited availability of resources, and a host of other issues.
How Inflation Impacts Businesses
In addition to everything mentioned above, inflation has other direct impacts on business. When inflation peaked in 2017 and 2018, the Federal Reserve raised interest rates on business loans multiple times. As we enter a period of inflation again, expect more interest rate hikes. As customers try to forestall making payments on things for as long as possible, businesses that issue invoices may find themselves waiting 30, 60, or even 90 days before they see revenue. Between interest rate hikes and staggered payments, inflation can cause severe cash flow strains for businesses in every industry.
Protecting Your Business from Inflation
Businesses can insulate themselves against inflation by boosting cash flow and relying less on debt-based loans. By partnering with an invoice factoring company, like New Century Financial, businesses can turn their unpaid receivables into cash quickly and efficiently. Invoice factoring is a debt-free service that eliminates staggered payments, resulting in accelerated cash flow. This allows businesses to cover expenses, build up capital reserves, and pivot away from traditional loans. Companies use factoring as an inflation-resistant financing method to put them in the best position possible in any economic climate.
To learn more about invoice factoring and how it can help your business during periods of inflation, reach out to the team at New Century Financial today or call us at 800-805-8380