A useful way to assist in labor intensive contracts with strong creditworthy customers is available to small business owners. Having secured a large contract – the reality of hiring new employees to do the work is they need to be paid regularly. When the company puts new staff on to begin the work it has to figure out where the money will come from to meet this larger payroll.
Given the right set of circumstances, a factoring company can provide operational capital using accounts receivables as collateral. When an invoice is produced, the factoring company wires funds directly to the company to help replenish their checking account. If the contract is going well and more staff is being placed the company can rest assured that factoring will act as a back stop for its growth.
This scenario is also relevant where products are sold by manufacturers. Replace employees and payroll with suppliers and raw material. The point is, if the company funds can produce an invoice, the factoring company will assist the rest of the way. Each succeeding invoice can be financed as it is submitted to the customer, providing the cash flow to operate. Invoice factoring is a useful tool. Not a crutch. It is a bridge to a better future.
The benefit is, as the invoices grow in size the factoring keeps up with that growth because the funding availability it based on the creditworthiness of the customer. There is no need to re-establish a larger line to accommodate the increased cash flow.