Cash flow should be simple, and there are many ways to go about finding a viable answer to your cash flow needs. We have discussed the many benefits of invoice factoring. Let’s take a look at another option that focuses on a specific financing requirement.
Have you heard of installment contract financing? It is a way of providing your customers with more options for payment so you can increase sales. If you can offer customers more ways to pay, chances are they are more likely to choose you as their business partner. Convenient monthly payment plans mean an easier way for your customers to pay, which leads to increased revenue for you, but how does this work?
You offer payment terms to your customers, and then turn your customer contracts into cash you can use now. You basically sell your contracts for immediate cash. Similar to invoice factoring, this is not a loan and it does not create any type of debt on your balance sheet. If you have to wait to receive payment over the life of a contract, you cannot make the best use of your working capital.
Which type of businesses/industries benefit?
Generally speaking, this type of program supports business-to-consumer sales for delivered products or services. For example, furniture, elective medical procedures, automotive repair and smaller ticket home improvement purchases.
- Providing an alternative payment option for their customers
- Offering loan amounts of $1,000 - $10,000 with payment terms of 6-48 months
- Generating gross profit margins of greater than 40%
The good news is that you can go ahead and offer customers that would not regularly meet minimum credit standards, a way of funding their purchases for goods or services. It is hard to turn away a customer because of their less than perfect credit score, and installment contract financing allows you to help all your potential customers. Providing financing to those with less than perfect credit also helps them to rebuild their credit rating. Don’t inhibit your ability to make the most out of every sale.
Invoice factoring allows you the opportunity to turn your accounts receivables into cash. On a more micro level, installment contract financing allows you to grow your customer base due to an increase in payment flexibility. Both options can generate an immediate cash infusion, thereby helping meet the costs of running your business, and allowing you time to focus on growing your business.