Manufacturers are no stranger to the ebbs and flows of seasonal demand and the impact it can have on maintaining proper inventory levels, fulfilling customer orders, and ultimately, turning a profit. Knowing when the time of year when growth opportunities are at their peak is great, but having a financial strategy in place for capitalizing on that demand is even better.
Invoice financing — also known as factoring — describes a financial transaction where a business leverages its existing invoices to generate working capital quickly. During periods of seasonal buildup, invoice financing is commonly used by firms looking to bolster their inventory, support sales growth, speed up cash flow, and strengthen balance sheets. Let’s explore how invoice financing can enable your business to take full advantage of seasonal growth opportunities.
#1 Bolster your inventory.
Invoice financing opens up more room for growth than you'd expect. Capital locked in unpaid invoices can be used to purchase and stock extra raw materials or inventory to help meet the seasonal demand of your customers to drive future growth. Taking this approach lets you place your cash where it fits best, and enables your invoices to work for you.
#2 Support sales growth.
During your busier seasons, sales can be expected to outgrow cash-on-hand as a result of your receivables increasing. With invoice finance, you can take control of your cash flow and reinvest the capital back into your business. The new source of cash flow can be used to pay suppliers, cover operating expenses, purchase additional inventory, make payroll, and maximize your production capacity.
#3 Speed up your cash flow cycle.
Waiting over 30 days to get paid hurts your pockets and passing up growth opportunities hurt your business. Financing receivables means unlocking immediate access to capital that would otherwise be in your customer's possession. Fund the growth of your business with affordable capital and turn away fewer opportunities when you have consistent access to liquidity. The cash you receive from invoice financing today can be used to generate a more substantial return in the future.
#4 Strengthen your balance sheet.
Unlike traditional financing solutions, invoice financing doesn’t require you to take on new debt and lives off of the balance sheet. Invoice financing converts your existing accounts receivable into working capital that can be immediately reinvested back into your business. This approach can also be used as a way to help your balance sheet quickly reflect quarterly or year-end gains.
If you're looking for consistent access to cash flow that can be used throughout the year, start by considering what you want to accomplish first. Invoice financing is a great way to help you generate the working capital needed for taking on new opportunities.
With the help of LSQ, the leading provider in invoice financing solutions, business owners can leverage seasonal demand to drive growth and speed up their cash flow cycles.
Interested in learning more about our invoice financing solutions for business owners?
Visit www.LSQ.com for more information.