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How Debt Factoring can Help Improve Your Cash Flow

 


The trickiest task for a business owner when running an enterprise is to maintain a steady cash flow. It determines the overall health of the enterprise and its financial stability. What is cash flow? It is the net amount of transactions, both cash and cash equivalents that move in and out of a business. Now, strengthening business finances with a steady cash flow might be the goal for you, but it’s easier said than done. That’s why business owners rely on business financing solutions like debt factoring. It helps in replenishing the cash reserves and prevents a cash flow gap. How it improves your cash flow? Let’s explore!

 

A Quick Review of Debt Factoring

Debt factoring is the act of factoring receivables. In debt factoring, the business owner sells the accounts receivables to a lender or a finance company. So, technically the former is able to unlock the funds stuck in his accounts receivables instantly by selling it at a slightly discounted value.

 

The latter takes control of the receivables ledger and offers funds to the former against the same. Once the lender or finance company takes over the receivables ledger the responsibility of recovering the debts falls upon them. 

 

In debt factoring the lender or finance company buys out your receivables ledger, factoring its risks for you. Let’s check out its features;

·        It allows businesses to unlock  up to 90% of the accounts receivables.

·        The collection of the debt falls upon the lender or finance company that is factoring the receivables.

·        It saves the business from late payments to the suppliers and vendors.

 

Debt factoring allows easy access to funds, even when you have a short trading tenure, ATO debt, and average or poor creditworthiness.

 

Debt Factoring Improving Cash Flow of Businesses

Cash flow deficiency caused by late invoice payments is a problem 4 out of 5 businesses struggle with in Australia. For small businesses with limited cash reserves, this can be a significant problem, often disruptive to the point where it hampers or slows down production due to its direct impact on procurement. That’s where debt factoring comes in handy. 

 

Debt factoring is a one off business financing where a business does a one off exercise to sell all the accounts receivables stuck with the debtors. It allows them to get instant access to cash within 24 hours. It releases the funds stuck in the ledger due to late payment. With the acquired funds, the business owner can invest in the development of the company. Moreover, since the finance company or lender buys the accounts receivables ledger from you, the debt recovery becomes their responsibility.

 

Conclusion

The trick to a beneficial debt factoring solution is getting in touch with a reliable lender or finance company. Broc Finance can help you connect with one. Broc Finance is a leading finance broker in Australia known for offering flexible and appropriate business financing solutions to business owners. They don’t provide you with the funds directly, but they will connect you with a lender so you can access the funds. For more details, call Broc Finance today!     

 

Source: https://www.brocfinance.com.au/blog/how-debt-factoring-can-help-improve-your-cash-flow/


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