Last month interest rates on loans were raised for the third time in 2018. As our economy gains momentum, the Fed may implement more rate hikes to guard against inflation. However, rising interest rates are also making businesses more cautious about taking out loans and looking for more flexible financing methods that don’t place debt on the books.
Avoiding Debt and Rising Interest Rates
Instead of seeking funding from traditional lending channels businesses are building capital by factoring receivables. Accounts receivable factoring provides debt-free capital by converting unpaid invoices to cash. Most businesses follow the standard practice of issuing invoices with a payment schedule of a month or longer. Instead of waiting on a staggered stream of revenue, factoring can convert invoices within a single day. The improved cash flow allows business to quickly build up a source of working capital without the need to rely on loans.
No Debt. No Installments. No Rising Interest Rates
Accounts receivable factoring offers a number of benefits that traditional loans do not. Perhaps the biggest advantage of building capital reserves through factoring services is that no debt is placed on the books. In essence, factoring is considered a sale of receivables, so no liabilities are generated. Because of this, there is no need to make regular installments on the financing, and factoring is not subject to arbitrarily rising interest rates. Additionally, accounts receivable factoring services give businesses more control over the amount of financing they receive from invoices. Businesses can choose to factor all of their receivables or only a portion, depending on their needs.
Invoice factoring gives businesses the ability to achieve rapid growth with losing any potential by placing debt on the balance sheets. Businesses can use accounts receivable financing to improve cash flow to smooth out uneven revenue cycles and to build up capital to roll out large growth projects. As opposed to single-purpose, single-use loans, factoring provides the versatility, flexibility, and efficiency business owners demand.
The current economic climate is full of growth opportunities for businesses. Instead of debt-based financing and increasing interest rates on loans, accounts receivable factoring can supercharge your cash flow and help you position your business for growth. Contact New Century Financial today and learn how factoring services can give your business a competitive edge.