Most business owners and investors agree that there comes a point in a business’s life cycle where growth actually begins to work against itself. Sales may be up and revenues growing, but the current business can’t handle the new challenges.
There are a number of factors that limit a business’s ability to adapt to a rapid increase in sales, including inadequate inventory, small-scale business technology, and an undersized staff force. The most common limiting factor, however, is insufficient cash flow. Businesses typically find that cash flow isn’t strong enough to support both revenue growth and physical growth.
To overcome these “growth hurdles” businesses frequently choose factoring as a practical, viable solution. Factoring allows rapidly growing businesses to meet the challenges of rising demand by speeding up their business cash cycle.
Businesses that choose factoring as a growth strategy have greater control of their accounts receivable turnover, and can generate immediate cash when needed. With immediate cash, businesses can use their revenues more effectively, rather than stalling inventory replenishments, production, or new hiring because cash is held in receivables.
Factoring enables a business to be more responsive to changes, and lets them run at a pace that is more in line with the speed of their growth.