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Invoice Factoring: Dependable Financing in Unpredictable Circumstances

Posted by Gil Oliva on Mon, Sep 21, 2020 @ 08:00 AM

Imagine this: You notice the ocean swell and churn as wave frequency, wind speeds, and rainfall steadily increase. The meteorological forecast is calling for a storm. Over the next couple of days, you prepare for the worst by boarding up windows, stocking up on food, and finalizing a potential evacuation plan. There might be a terrible storm, but it could just as easily blow over. What matters is whether you are prepared.BVF III

We can apply this metaphor to business financing. When the business or stock markets dip, stay steady, or suffer a major crash, you want to continue running your business. 

This is especially relevant in the wake of coronavirus – business owners everywhere are doing everything in their power to stay afloat. Businesses temporarily or permanently closing their doors as a result of the pandemic certainly took a toll on the economy and will likely have a long-lasting impact on the stock market well into 2021. 

It has only been roughly six months since lockdowns were imposed, and companies started feeling tangible effects to their revenue - whether that was an unexpected uptick or downturn in business. This means that we don’t yet have enough data to make reliable predictions or forecast models. Between all the volatility and uncertainty in today’s markets, it doesn’t hurt to make fiscal preparations in the event an economic “hurricane” makes landfall. 

Invoice factoring is one way to ensure that stability. You can depend on invoice factoring regardless of the state of the stock market. When you leverage invoice factoring to maintain cash flow, it can help you weather future unpredictable financial storms. Be protected against:

  • Volatile Markets

Since 2015, the Standard & Poor’s 500 Index, the Dow Jones Industrial Average, and Nasdaq Composite have slowly but surely grown each year – until March 2020. Each of these stock market indexes dramatically dropped to the lowest they had been in several years. However, we have since seen a climb above and beyond previous numbers as each of these indexes now reach peak records.

With invoice factoring, you will get the money your business worked to earn, regardless of those peaks and valleys.

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  • Uneven Growth – Nationally and Globally

Since 2017, the GDP growth rate in the United States has remained relatively stable. In 2020, the rate became -5.91% as compared to +2.33% in 2019. However, projections for 2021 show the GDP rate increasing to +4.74% in 2021, according to Statista

Globally, the GDP rate is following a similar trend as the United States. These projections point to a cumulative loss to the global economy of about $12.5 trillion over two years (2020-2021) due to the pandemic crisis, according to the International Monetary Fund

Global growth is based on many factors, therefore business owners should always be aware of the potential effects to their business’ bottom line.

  • High Q Ratio

The Q ratio is a popular method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. The Q ratio suggests the collective stock market value should equal its replacement costs. It is measured by summing the entire stock market price and dividing it by its replacement cost. The average Q ratio is about 0.78, and it is currently estimated at 1.86, according to Advisor Perspectives

Those who are watching the market are concerned about this, but as long as your financial storm windows are in place, you know that your business has an extra layer of protection against the storm.

How Bay View Funding and Invoice Factoring Can Help You Stay Afloat

For businesses that depend on lending, the uncertainty of our current (and future) market can be concerning because capital sources could suddenly become unavailable; fortunately, those concerns can be less cause for crisis with invoice factoring. Invoice factoring can help your business weather the floodwaters of a global pandemic and economic downturn by helping your company maintain a steady cash flow or, in some instances, helping build a cash reserve.

The qualification process of invoice factoring only takes a few days. Once approved, you’ll receive funds usually within 24 hours. Invoice factoring can bring an end to the burden of waiting on payment. If you have questions about invoice factoring or would like to speak with an agent, don’t hesitate to contact Bay View Funding today.

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Topics: Alternative Financing, Working Capital, Business Financing

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