The technology industry covers a wide range of businesses, from hardware companies to software development, independent consultants, and everything in between. Yet whether your business sells large hardware configurations, consulting services on long-term projects, or subscription-based services, working capital keeps the lights on, allows people to find solutions, and meet time-sensitive deadlines.
Invoices and the Speed of Technology
Accounting and technology move at different speeds. A fast a crucial tech solution may be delivered within hours, but the rate at which clients pay their invoices may take a month or more. This disparity can severely restrict finances. Even lean tech startups require some very high-end resources to deliver on contracts and customer requests, and the lag in payments can cause operations to grind to a halt.
Resolving the Equation
In order to keep cash flow moving faster, and to build up the amount of working capital on hand, tech companies are using factoring services. Tech factoring unlocks revenue held up in unpaid receivables. Factoring is much faster and more efficient than traditional loans, and factoring doesn’t place debt on the books. Factoring gives businesses in the tech industry access to capital which can be applied to basic overhead expenses, research and development, and alleviate the need for “crunch time.” Tech factoring also allows businesses to build up the capital necessary to take on larger clients without placing a strain on internal resources.
Many tech startups cannot access loans for a number of reasons. First, traditional lending channels still view the tech industry as a high-risk field. Second, many tech companies are startups operating on a lean staff with a short history of financials and low credit ratings, precluding them from loan approval. Because tech factoring is debt free and structured around an exchange of receivables for cash, businesses can preserve and build credit ratings.
Mergers and Acquisitions
Mergers and acquisitions are not uncommon among technology businesses. However, both mergers and acquisitions require a reliable source of capital, especially during the delicate transition phase. Technology factoring allows companies to boost cash flow during these crucial transactions to ensure there is ample capital to cover immediate concerns and expenses. Taking advantage of the benefits of factoring services can enable rapid growth for businesses in the tech industry.
New Century Financial is a national leader in technology factoring for all types of businesses in the industry. Contact our offices today and learn more about how we can improve your cash flow.