Overview
Trading accounts receivable for an immediate influx of operating capital can make your business more secure in the long run and more liquid today.
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Factoring Helps Businesses with Limited Capital Increase Cash Flow
The past two years have forced many businesses to make unexpected operational changes. In a March 2022 poll from the U.S. Census Bureau1, over 65% of participating businesses reported being negatively affected by the pandemic. Many persistent businesses have weathered the storm by seeking out alternative strategies to maintain operations, while unfortunately, hundreds of thousands of businesses have closed — unable to adapt.
While some businesses’ newly-adopted operational adjustments will be phased out in time, other such measures have proven themselves to be valuable holdovers for the future. For example, factoring, as a means of creating cash flow, has become an essential tool for many businesses with limited capital, allowing those entities to level the playing field with their more limber competitors.
As the global economy ameliorates itself in the coming years, factoring will play a significant role in the recovery.
For businesses with limited capital, one of the most impactful lessons of the pandemic was the true value of liquidity. Due to their size, financing, or any number of factors, under-capitalized businesses regularly grapple with significant challenges that may be universal but simply don’t affect cash-rich companies to the same extent. Often, these challenges arise in the form of missed opportunities — special pricing, new product development, etc. — but generating immediate cash flow can create unique competitive advantages for under-capitalized businesses.
Low overhead and operational flexibility can make a business incredibly nimble, but the ability to adapt isn’t worth much if the necessary funds aren’t available for seizing opportunity when it materializes. When materials are in short supply, having the cash flow to place bulk orders can help a business avoid rising prices. When the opposite is true, taking advantage of discounted pricing can help a business shore up its defenses for future market turmoil. When invoices are paid in a timely manner, beneficial relationships with vendors can be cultivated and, in uncertain economic conditions, a little extra cash on hand can spell survival when customers start to default on their own payments.
For the most part, these issues are of less concern to companies with financial padding. Factoring is a form of asset-based lending, so it is a simple and immediate method for creating that vital padding. Milberg Factors offers several options for businesses looking to establish this type of financial freedom and flexibility:
Factoring enables businesses of all sizes to trade their accounts receivable for an upfront cash payment worth as much as 85% of those unfulfilled accounts. In addition to a percentage of the remaining balance, as it is collected by the factor, the company receives a swift influx of capital that can create an invaluable increase in financial flexibility. Factoring presents unique benefits, as it helps businesses generate capital without taking on debt or waiting for lengthy approval processes to play out. Furthermore, unlike traditional loans, factoring can even be an option for businesses with credit concerns, as a factor generally focuses on the creditworthiness of the customers whose accounts are being transferred, not that of the business itself.
“As the global economy ameliorates itself in the coming years, factoring will play a significant role in the recovery by providing illiquid businesses with the capital they need to flourish,” said Milberg Factors CEO, Daniel Milberg. “Our team helps businesses of all sizes generate cash flow and navigate the new opportunities that will shape their respective futures.” To find out how factoring can help your business, contact Milberg Factors, Inc.
CONTACT
For more information about Milberg Factors, Inc., please contact Daniel R. Milberg at (212) 697-4200, David M. Reza at (818) 649-7587, or Ernest B. White at (336) 714-8852, or email us at info@milbergfactors.com.
1https://portal.census.gov/pulse/data/
finance, banking, factoring, business communications, receivables financing, credit protection, credit management, A/R management
