Preventing Business Bankruptcy in an Unpredictable Economy

As we enter the first year anniversary since the start of the COVID-19 pandemic, businesses are still facing challenges to maintain cash flow and prevent bankruptcy. Take heart! With increased vaccine production and distribution, it looks like everyone has entered the homestretch to get “back to normal.” Fortunately, there are ways for businesses to prevent bankruptcy as we approach the finish line.

Loans and Business Bankruptcy

When the pandemic hit, businesses struggled to maintain sales while trying to pay off existing debt. At the same time, banks tightened their credit and collateral requirements, making it extremely difficult for businesses to take out short-term loans to smooth over uneven revenue cycles. The first round of PPP loans offered very limited support, and while the economy is slowly entering an uptick, businesses are looking for cash flow solutions that are not debt-based so they can preserve credit and collateral while avoiding bankruptcy.

Cash Flow and Bankruptcy

Whether the economy is experiencing a downward turn, or if it’s on an upswing, businesses can face bankruptcy due to cash flow. Outside of retail and other businesses that use a point-of-sale system, most businesses issue invoices to customers with staggered schedules of 30, 60, or even 90 days. The lag in payments creates a strain on cash flow, with more money being spent than is coming in as revenue. This is especially risky now, when clients may file for bankruptcy themselves before their invoices are paid. Businesses need a way to reduce or eliminate the lag between sales and customer payments.

A Solution to Prevent Bankruptcy

To steer clear of bankruptcy and accelerate cash flow, businesses use accounts receivable factoring. When businesses use factoring, their outstanding receivables are converted into cash quickly, without placing debt on the books. This allows businesses to greatly reduce the time between sales and access to revenue, while also building up capital reserves to weather economic downturns and roll out growth plans during upswings.

At New Century Financial, we are a nationwide leader in accounts receivable factoring services. We factor invoices and make funds available to our clients within 24 hours. We put our clients in control, letting them choose which invoices or parts of invoices we factor for them. If you want to boost your cash flow and avoid bankruptcy, contact the team at New Century Financial today.