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.