Category Archives: Factoring Benefits

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Understand Accounts Payable, Accounts Receivable, and Liabilities

In order to run a successful business, a lot has to happen on the back end. Accounting, which is usually performed by the business owner in the beginning, is the place where revenue and expenses meet, and hopefully result in a positive number. While business accounting can become very complex, do-it-yourself business owners can make things easier by understanding the differences between accounts payable, accounts receivable, and liabilities.

Accounts Payable

Accounts payable are fairly simple. They consist mostly of bills to your business that you need to pay. Typical accounts payable include invoices from suppliers, payroll expenses, lease payments on the office or facilities, company lines of credit, and other short-term debt and overhead costs. Think of accounts payable as an inbox, of sorts. Your goal as a business owner is to keep that inbox empty by paying off any amounts due to other people or businesses.

Accounts Receivable

For many business owners, accounts receivable is the enjoyable part of accounting. In short, accounts receivable is the money owed to your business from sales, consultations, and other services. Within accounts receivable, there is money that has been received from customers, and outstanding balances that have yet to be settled. Since most invoices are issued with a window of at least 30 days, revenue is often staggered. If a client’s account goes unsettled for longer than the schedule on the invoice, your business may have to perform a collection to get the money you are owed from the sale.

Liabilities

Liabilities are similar to accounts payable, with the exception that liabilities include both short and long-term debts, as well as obligations to outside parties. Bills, loan payments, expenses, services and products that have yet to be delivered, and more fall under liabilities. Future pay-outs on legal matters, warranties, insurance, and more are also considered liabilities.

By looking at your organization’s accounts payable, total liabilities and accounts receivable, you can get a clear picture of your cash flow. One of the best ways to improve your cash flow is through factoring services, which quickly convert outstanding customer invoices to cash, so your business has ample capital to cover your liabilities, and plan for growth projects.

At New Century Financial, we help businesses achieve an improved cash flow with our factoring services. If you need a boost in cash flow, or are tired of the lag in customer payments, contact the experts at New Century Financial today.

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How the Debt Cycle Limits Growth for Small Businesses

When businesses need funding, the conventional solution is to take out loans for working capital. This sets the debt cycle into motion, and many businesses find themselves dependent on loans for the duration. However, the debt cycle can place a big strain on finances and limit business growth.

What Is the Debt Cycle

When a business takes out a loan, the capital is given in exchange for debt. The business then makes payments on the loan, plus interest, to pay off the debt. Loan debt takes a good chunk out of monthly revenue, and payments must be made regardless of how many or how few sales are made in that time. If cash flow is strained, businesses may take out additional short-term loans to smooth out revenue cycles at the risk of placing even more debt on the books, and juggling various loans at different interest rates can place a business in the fast-lane towards bankruptcy.

Business Growth and the Debt Cycle

When businesses try to position themselves for growth, they also take out loans to cover the cost of expansion and increased production. The debt that comes with loans for growth capital increases the risk for business owners and limits the potential for expansion. As a business expands, the revenue must exceed the new overhead costs as well as the debt from loans in order to be successful. To compromise, many businesses scale back on growth projects so debt and overhead costs are more manageable. Even still, increased sales do not guarantee faster revenue, especially if invoices are issued on staggered payment schedules of 30 days or longer.

Breaking Free of the Debt Cycle

To maintain a healthy cash flow, build up capital reserves, and reduce or eliminate the need for debt-based financing, businesses use accounts receivable factoring. Instead of waiting a month or longer to receive payments from clients, accounts receivable factoring immediately converts unpaid invoices to cash, which allow for rapid and successful growth without the limitations of debt-based loans. No debt, fast revenue, and minimized risk that gives businesses an advantage over the competition.

At New Century Financial, we provide accounts receivable factoring services that can be tailored to fit your needs and help you reach your goals. Contact our offices today to get started.

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Business Finances: An Overview for New Entrepreneurs

New business owners often wear many hats at once, acting as their own sales, marketing, administrative, and accounting departments. Unless they’ve had prior experience as a CPA, most business owners will agree that accounting and managing finances can cause the most headaches and take up the most time. Fortunately, there are some easy tips to make managing business finances easier so you can streamline the accounting process and focus more on getting sales and growing your operation.

Keep Business Finances and Personal Expenses Separate

On the outset, this rule seems fairly obvious. As time goes on though, the lines can get blurred. Using personal savings to fund your business shouldn’t happen, but some start-ups do use personal money to launch and maintain operations. Additionally, some business owners make purchases such as office supplies, and purchase an item or two for personal use in the process. It is imperative that you keep business finances and personal expenses separate. Not only will this help to simplify accounting, but when you need to justify tax deductions with receipts, tracking business versus personal expenses becomes much easier to track.

Working Capital and Cash Flow

Working capital is what allows you to maintain and grow your business. Working capital can come from business lines of credit, revenue, or other sources of funding. Cash flow, on the other hand, and seem like a constant tug of war. Ideally, business finances are constantly improving due to a regular influx of revenue from sales. However, since most invoices are issued with payment schedules of 30 to 90 days, many small businesses experience staggered revenue with expenses outweighing income. Maintaining a healthy cash flow can create stable business finances to achieve fast growth without relying on loans.

Staying on Top of Customer Invoices

Waiting on payments from customers and tracking unsettled accounts can eat up a lot of time and resources. Your business depends on receivables, and waiting a month or longer to receive payments can place a big strain on business finances. To speed things up and boost cash flow, many small businesses use accounts receivable factoring. Factoring turns unpaid invoices into cash within 24 hours, so you can maintain a positive cash flow, build up working capital, and make the accounting process much easier.

At New Century Financial, we provide the most comprehensive factoring services nationwide. Contact our offices today and get the factoring solutions you need so you can focus on building and growing your small business.

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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.

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Your Business Has Excellent Sales! So Where Is the Revenue?

Your business has excellent sales and a growing customer base, but when you look at the books, you see more money going to cover expenses and payroll than you see coming in. The realization that cash flow is reversed can be very stressful. This situation is more common than you think, and there is a simple solution to rightsize your cash flow for good.

Why Is Revenue So Low If Sales Are High?

High sales figures are great for businesses of any size. At the same time, invoices are issued with payment periods of 30, 60, or 90 days. The disparity between the sale and time it takes to receive payments from clients results in a reverse cash flow. More money is going out than coming in. While the payment periods on invoices are a standard business procedure, small businesses end up getting hit the hardest, even if they are making lots of sales. When revenue is tied up in unpaid receivables, short-term capital issues can turn into major headaches.

Improving the Parity between Sales and Revenue

To maintain a positive cash flow and achieve better parity between sales and revenue, businesses use accounts receivable factoring. Factoring services have a fast turnaround on invoices, so instead of waiting 30, 60, or even 90 days to access cash, businesses can see capital from invoices in as little as 24 hours. Factoring eliminates the lag that causes cash flow issues. Because factoring does not place any debt on the books, businesses can preserve their credit ratings and position themselves for growth quickly, instead of taking out a series of short-term loans to rightsize problems with cash flow.

Supercharge Your Cash Flow

New Century Financial provides the most comprehensive accounts receivable factoring services so you do not have to wait on customer payments or deal with cash flow issues. Our factoring services allow you to choose which invoices, or parts of invoices, are factored and you will get access to cash within 24 hours. Our team will work with you to create a factoring strategy to help correct cash flow issues and help you reach your goals without relying on debt-based loans. Contact New Century Financial today to get started.

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Reducing Debt for New and Small Businesses

One of the biggest hurdles for new and small businesses to overcome is debt. Launching, maintaining, and growing a business requires capital, and the typical “go to” solution is to take out loans. However, relying on loans leaves new and small businesses struggling with debt which keeps them from growing successfully.

How the Debt Cycle Hinders Small Businesses

New and small businesses use loans for a variety of purposes, such as for working capital, equipment, supplies, and materials. Loans place debt on the books and impact credit ratings, which keep businesses from getting larger funding amounts to grow. Businesses then need to put aside a good portion of their revenue to repay the debt, so they can start the borrowing cycle all over again. If unexpected circumstances arise, such as sudden expenses or uneven revenue cycles that do not cover overhead expenses and payroll, businesses may take out short-term loans to correct these issues. The debt, low credit ratings, and the strain placed on cash flow from loan payments prevent new and small businesses from thriving and growing.

Reducing Debt and Boosting Cash Flow

New and small businesses can follow a two-step process to reduce and eliminate debt, while improving cash flow at the same time. The first step is to employ debt consolidation. Juggling multiple loans at varying interest rates costs money, time, and resources. By consolidating debt into one loan with manageable monthly payments, businesses can start to build their credit ratings and streamline accounting. The second step is to boost cash flow with invoice factoring. Instead of waiting a month or longer for clients to pay on outstanding receivables, factoring converts invoices to cash within 24 hours. This gives businesses faster access to revenue and ensures overhead costs are covered. Because factoring does not place any debt on the books, businesses can preserve their credit ratings and accumulate the capital necessary for rapid growth.

Put Your Business on the Fast Track to Success

New Century Financial is a national leader in invoice factoring services. We help new and small businesses supercharge their cash flow with fast turnaround on receivables. We also put more control in your hands by letting you choose which invoices and parts of invoices are factored, so you can grow your business quickly and maintain a competitive edge.

Accounts Receivable Factoring Vs. Merchant Cash Advances: How Things Stack Up

 

Of the most popular alternatives to traditional loans, accounts receivable factoring and merchant cash advances top the list. In order to give business owners a better idea of how the two stack up, we put together a side-by-side comparison according to the features entrepreneurs look for the most in financing solutions.

  1. Debt-Free Financing

Merchant Cash Advance: An advance in funding with no debt on the balance sheet.
Accounts Receivable Factoring: Cash for receivables with no debt on the books

Advantage: Equal

  1. Interest and Fees

Merchant Cash Advance: High interest and additional fees baked into the agreement.
Accounts Receivable Financing: No interest or additional fees. The amount of financing is structured around the creditworthiness of your customers.

Advantage: Accounts Receivable Factoring

  1. Repayment

Merchant Cash Advance: Balance is repaid from a percentage of sales with a large balance remaining at the end of the terms.
Accounts Receivable Factoring: There is no repayment. Factoring is an instantaneous transaction with no need for terms or contracts.

Advantage: Accounts Receivable Factoring

  1. Funding Limits

Merchant Cash Advance: Single-use and based on average monthly revenue.
Accounts Receivable Factoring: No upper limits. Businesses can choose which invoices or parts of invoices are funded, and factoring is reusable for as long as your business issues invoices.

Advantage: Accounts Receivable Factoring

  1. Versatility

Merchant Cash Advance: Typically used for short-term growth or working capital.
Accounts Receivable Factoring: Accounts receivable factoring can be used to correct cash flow issues, build up cash reserves, growth and working capital, making payroll, paying down existing liabilities, purchasing inventory and materials, advertising, and anything else your business needs.

Advantage: Accounts Receivable Factoring

  1. Agency and Control

Merchant Cash Advance: Borrowers are subject to the interest, fees, and terms of the agreement.
Accounts Receivable Factoring: Businesses have a complete say in how much of their receivables get funded. As there are no fees or contracts, businesses can create their own factoring strategies tailored to their needs and goals.

Advantage: Accounts Receivable Factoring

New Century Financial is a national leader in accounts receivable factoring solutions. We provide comprehensive factoring strategies to help businesses thrive and achieve long-term success. Contact our team today to learn more about how New Century Financial can improve your cash flow and help your business accumulate the capital it needs for growth.

Debt-Free Growth Capital? A Better Alternative to MCAs

Traditional loans are not the be all end all of business financing. With funding limits, debt, and arbitrary interest rate hikes, many businesses are seeking out alternative solutions to the traditional loan model. When it comes to growth capital, merchant cash advances seem like an attractive alternative to bank loans, but there are a few things you should know before you apply for that MCA.

How MCAs Impact Businesses

Merchant cash advances, or MCAs, are offered as an alternative to traditional loans. Businesses use MCAs to roll out growth projects quickly without being limited by the red tape of traditional lending methods. MCAs do not place debt on the books and do not require any collateral. As such, MCAs have much higher interest rates and additional fees to ensure the lender makes a profit from a business that is equal to or more than the cost of a traditional loan. MCAs are also advertised as having flexible payment methods. Since there are no fixed payments, MCAs are repaid electronically from a percentage of your customers’ credit card transactions. At the end of the agreement, if the balance, interest, and fees are not repaid, businesses can expect a large balloon payment due to the lender. A merchant cash advance can have a boomerang effect that ends up placing a big strain on finances after growth is achieved, leaving businesses with very few options.

A Better Alternative for Growth Capital

When loans are not in the picture and MCAs offer more risk than return, business owners turn to accounts receivable factoring for growth capital. Factoring allows businesses to turn unpaid receivable to cash within 24 hours, instead of waiting a month or longer to customers to settle their accounts. In addition to improving cash flow, accounts receivable factoring allows businesses to quickly accumulate the capital necessary so they can act on growth opportunities. Accounts receivable factoring is debt-free, and does not have any of the additional fees and covenants of a merchant cash advance. There are no payment schedules, and businesses can choose which invoices or parts of invoices get funded. Accounts receivable factoring is used by businesses of all types as a fast, direct, affordable, and transparent method of building up capital reserves for growth.

New Century Financial specializes in accounts receivable factoring solutions for businesses. If you are trying to position your business for growth, and want a smart and viable financing solution, contact New Century Financial today.

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Merchant Cash Loans: Short-Term Solutions with Long-Term Headaches

Many businesses use merchant cash loans or merchant cash advances as a means of sidestepping the debt and fixed payments of traditional loans. However, the devil is in the details, and a merchant cash loan can easily place a major strain on cash flow and can potentially threaten to turn business finances upside down.

How Merchant Cash Loans Really Work

Merchant cash loans are frequently advertised as an infusion of capital without debt and lots of flexibility. The balance is repaid from a percentage of sales instead of fixed payments, giving businesses more financial leeway. The reality of merchant cash loans is that, while they may not place any debt on the balance sheet, merchant cash loans have other strings attached. Because they are sold as “a debt-free cash infusion” on the front end, merchant loans come with very high interest rates as well as hidden fees. While the repayment method seems flexible, the interest and fees result in an extremely large balloon payment at the end of the term agreement. A business would have to more than double its revenue for the full terms of the merchant cash loan in order to make any headway on the balance owed. This can place businesses in a financially precarious position.

Removing Your Merchant Cash Loan Headache

If you have used a merchant cash loan and are now burdened with a large balance due to your lender, there is still a viable solution. Accounts receivable factoring can help to quickly pay down the balance before the interest and fees flip your business finances. Accounts receivable factoring converts unpaid invoices to cash within 24 hours, so you can access the funds you need to maintain regular business operations and eliminate the balance owed on a merchant cash loan. Accounts receivable factoring is truly debt-free, completely transparent, and with no hidden or additional fees. While many businesses use accounts receivable factoring to boost their cash flow, others use factoring to quickly get rid of the looming balances from merchant cash loans and other so-called “flexible financing methods.”

New Century Financial specializes in accounts receivable factoring solutions. If you own a business and are trying to get out from under a merchant cash loan, or you simply want to supercharge your cash flow, contact our offices today.