If you own a small business, you’re probably familiar with the challenge of not having as much cash at your disposal as you’d like. At certain times, you may encounter cash shortages if some of your clients aren’t paying you promptly. Some businesses experience seasonal shifts where money flows in more freely at certain times of the year than others. For these and similar circumstances, having a small business line of credit is very useful.
Typically a line of credit is granted to a business that has enough history to demonstrate its ability to generate cash flow. The credit line is used to fill in the gaps caused by seasonal issues, unplanned growth, or other causes of cash shortages. The lender usually takes a first security interest in all assets of the company, and often on the assets of the owner as well.
In simple terms, the lender establishes a pool of funds that’s available for the business to use as long as its financial situation remains strong. Principal and interest are repaid according to the lender’s terms.
For many businesses, however, getting a line of credit isn’t so simple. If your business is new or your own personal credit is less than pristine, you may find that it’s hard or impossible to get the credit you need. One alternative you may not have considered is invoice factoring. This is a way to improve cash flow without obtaining a traditional loan.
Invoice Factoring: How it Works
Invoice factoring is a distinctive financial service offered by certain companies, including Riviera Finance, which we’ll look at more closely below. The way it works is that the factoring company purchases your accounts receivable and gives you cash up front. This solves your cash flow problems as you don’t have to wait for clients to pay the invoices.
In some ways an invoice factoring line is like a business line of credit. As long as you have collateral in the form of invoices (accounts receivable), cash flow is available to you when you need it. The amount available is determined by the advance rate (usually between 70% and 95% of the invoice) and the credit quality of the customers.
While invoice factoring can be thought of as a business loan or a small business line of credit, it works differently from traditional loans. For one thing, you don’t need perfect personal credit to obtain this type of financing. The factoring company actually looks more closely at your customers’ credit, because the customers are the ultimate source of payment. And because of this, using a factoring line your company doesn’t incur debt.
Invoice factoring is a simple way for small businesses to take control of their finances and solve cash flow problems. One of the leading invoice factoring companies in the U.S. and Canada is Riviera Finance, which has been working with businesses since 1969.
Advantages of Working with Riviera Finance
When you choose invoice factoring with Riviera Finance, you open your business up to many new possibilities. You can break through limitations that are caused by restricted cash flow.
- Earn more favorable pricing and credit terms with your suppliers.
- Spend less money and effort on collections and redirect your resources to more fruitful areas as such as marketing, production and expansion.
- Have more available cash for essential resources, including employees and equipment. You’ll find it easier to stay current with financial obligations such as payroll, utilities, supplies and other ordinary business expenses.
- Use your increased cash flow to pay off bad debt and improve your credit rating.
These are some of the ways that invoice factoring can help make your business stronger. If you’re considering this type of arrangement, it makes sense to work with a company that’s been doing it for a long time and that has extensive resources. Riviera Finance has more than 150 employees in over 25 locations throughout the U.S. and Canada. We provide an advanced tracking system called ROAM (Riviera Online Account Management) that lets you keep track of all your transactions 24/7.
The Riviera Process
Invoice factoring is extremely powerful for businesses that need a line of credit, but it’s not complicated. It entails just a few simple steps.
- Become a client of Riviera Finance.
- Tell Riviera which invoices you want to submit for factoring.
- Riviera establishes credit limits on your customers.
- You deliver your product or service as usual, and send your invoice with backup to Riviera.
- You get paid within 24 hours. Riviera retains a fee for the service.
- Riviera collects payment on the invoices directly from your customers.
This is a simple and efficient process that takes all of the worries and hassle out of collecting invoices directly from clients. With enhanced cash flow, many businesses find it easier to grow and accomplish their goals. If you’re looking for a small business line of credit, invoice factoring is often the easiest and most advantageous option. To find out more about how your business can benefit from this service, contact Riviera Finance today.