All businesses have been struggling to survive the current economy, but small business owners do not have the resources that larger businesses have. This is why so many small businesses have gone out of business during 2009. The good news is that the current economic recovery in progress will actually aid many businesses.
Many small businesses have been forced to close while others have either changed their model, introduced new products or services, or have added products. Typically during a recession it is the marginal businesses that do not survive, and this is true for all industries. It is this kind of "cleansing? that closes some doors, but opens up doors for other new businesses that start up after economic recovery.
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So it is actually growth that creates an opportunity for many small businesses because as the surviving businesses grow, they will need funding that can not be obtained through traditional financing such as banks, credit unions or other asset based lenders. Likewise, the new businesses starting have limited assets, also requiring invoice factoring services.
How can invoice factoring aid these small businesses? Well you may need to know some new terms, as follows:
The ability of a business to convert assets into cash is called asset liquidit. It's an important part of any small business practice, because working capital is really important in business operations. Working capital and liquidity -- this allows business owners to meet their obligations and to stay in business. Good cash flow is critical to the survival of any small business.
No matter what way you look at it or what you call it, assets bring value to your company, in the form of cash. But an asset can also be your inventory, tools, supplies, machines, even your building. The opposite of an asset is a liability, an obligation or outflow of money. One liability - a loan that you are making payments on or some other obligation that costs money. If you have a liability, you need to turn a liability into cash.
Liquidity - this is when you turn an asset into cash. It is also the degree that an asset can be exchanged in a business transaction without losing value. Cash is the most liquid asset. Your inventory is another asset that can be turned into cash. another asset includes invoices.
Invoices can be turned into cash while waiting for their payment can be done via invoice factoring. Factoring companies will look at your customers' credit (not yours) and can pay you the majority of what's owed to you within as little as 24 to 48 hours. factoring can be a good new business strategy for profitability.
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