Things have certainly changed since our last blog, in April, when the economic disruption from COVID-19 was in its infancy. All these months later, things are still in flux, with many business owners looking for creative solutions to keep their heads above water during this unprecedented time.
With many years of experience serving as a lending partner to businesses in a variety of industries, we offer a variety of financing alternatives to fit any situation — including lines of credit, working capital loans, and equipment financing. However, during this pandemic, a solution we have been using more and more to help businesses survive is factoring; it’s an increasingly popular way to combat cash flow disruption.
What is Factoring?
According to Investopedia, a factor is an intermediary agent that finances receivables — essentially a funding source that agrees to pay the company the value of an invoice less a discount for commission and fees. The practice is known as factoring, factoring finance, and accounts receivable financing.
The factor advances most of the invoiced amount to the company immediately, but it only provides the balance upon receipt of funds from the invoiced party. There are three parties directly involved in a transaction involving a factor: the seller of the receivable; the factor, who purchases the receivable; and the debtor, who must now make a payment to the factor, who is the owner of the invoice, rather than to the company.
Basically, a business sells its accounts receivables to the factor (Clear Skies Capital) in exchange for immediate cash flow—working capital that can be used to make finance payments, cover payroll, purchase inventory, and more.
Why Factoring?
Factoring is a smart solution to combat cash flow crunches without taking on additional debt. In addition, it offers unlimited funding potential (based on accounts receivables); approval is based on clients’ credit strength rather than the business’; and it’s available to any size business, even a startup.
Why Clear Skies Capital?
For many years, we have supported businesses that need alternative funding solutions — giving them that sought-after “yes” after many have been turned down by traditional lenders like banks. We are here when the economy is strong, and we are here when the economy is troubled, like it is now. Our commitment is to do all we can to help businesses survive short-term financial setbacks — and we’ve been the difference between coming out stronger on “the other side” and having to close up shop for countless clients.
The Takeaway
Even with the pandemic continuing to negatively affect many industries, there are financing alternatives available for business owners who need support to maintain operations. If factoring sounds like an attractive option for your business, we invite you to contact us to discuss your situation, get pre-approved, and see how much funding you qualify for today. It’s free to investigate factoring and you’re not obligated to take funds.