A merchant cash advance is the sale of future credit card sales or other receivables. Companies with predictable cash flow from sales can use this practice to smooth out cash flow.
You may have heard that there's no qualification process for accounts receivable funding services -- well you heard wrong. But the focus really isn't on you, it's on the invoices and customers you intend to sell to the factor.
Forecasting and understanding your cash needs as you grow your business is one of the biggest problems that small businesses have. If you don't understand cash flow, if you confuse cash flow with profit ... you need to have a conversation with Joe Knight. Or you can read about ours.
Usually, we call these "buyer's guides," but when you're factoring your receivables, you're not buying. You're selling. Specifically, you are selling your receivables to a third-party who, in turn, immediately pays you a price that is discounted from the face value of the receivable. Learn how it works here.
Education is a powerful marketing technique. Educate your prospective buyer about everything including a few of the bad or less positive aspects of your product or service), and you’ll sell to almost twice as many people as you do now.
Company.com "Made for Business" video.
How should you manage your cash properly? First, you better know how much you've got, where it is, and where it's coming from. If the information is in your accountants head, that's a start. If you need to improve your cash flow, you might look at accounts receivables funding or the judicious use of credit. Read our primer on understanding cash flow.
Account receivables factoring companies provide funding or payments due to you from your customers. You sell the debt to a factoring organization at a discount, the factoring company gives you cash and collects the full debt from the client when it's due. You get paid, your customer gets time.
If the bank won't lend you capital, how do you finance your business? We're assuming you don't have a rich Uncle Tony and don't have a winning lottery ticket in your pocket. Your choices after that are institutional lenders, private lenders, account receivables funding, or selling a part of your business. Finding capital can be tough, but here's how to find a few, and how to be professionally prepared to answer the tough questions a lender might ask.
Aaron Patzer, CEO of Mint.com, discusses startup accounting and the financial history of Mint.com, which recently bought by Intuit for $170 million. Slides and video of Patzer's presentation are included.