There are many reasons businesses use factoring services. Some want to catch up on accounting and get revenue from unpaid client invoices. Others need short-term working capital to cover expenses or take advantage of time-sensitive business opportunities. Still other businesses use factoring to build up reserves for growth projects. No matter the reasons, businesses have found that factoring is a sensible and stable form of financing whether the economy is booming, stagnant, or in a downturn.
Loans Are Unpredictable
For the past decade or so, businesses have been pivoting away from traditional loans. The requirements set by lenders keep increasing, which makes much-needed financing inaccessible to small businesses that might not have the collateral, credit ratings, or established sales history to qualify for loans. Additionally, interest rates on traditional business loans are subject to change. In 2017 and 2018, the Federal Reserve raised interest rates multiple times, placing a strain on finances for business owners everywhere. In a strong economy, increased interest rates and high requirements can prevent businesses from growing to their full potential. In an economic downturn, loans, interest, and debt can force businesses to declare bankruptcy.
Factoring Offers Secure Financing
In contrast to traditional loans, factoring remains steady in all economic conditions. The main reason for this is that factoring is structured around receivables. Receivables are hard assets with a verifiable value. Clients purchase goods and services and invoices are generated. Factoring converts those receivables into cash. The process is not a loan, so businesses do not have to worry about putting up collateral, taking on debt, or varying interest rates. In a strong economic climate, factoring allows businesses to boost cash flow, quickly build up reserves for growth, During a downturn, factoring provides fast access to working capital to cover overhead and keep operation moving.
At New Century Financial, we offer factoring services for your receivables. Whether you need working capital or if you want to ensure a strong cash flow for your business, we can help. Our factoring services put you in control of which invoices or parts of invoices get factored. If you want a financing solution that is stable and reliable in all economic conditions, contact New Century Financial today and ask about our accounts receivable factoring solutions.