Is Invoice Factoring Right for Seasonal Businesses?

Updated: Sep 14

There is no denying that surviving the slow sales months requires entrepreneurs to plan things for future. For example, if you own a landscaping company in a city that endures cold weather for several months a year, your company probably will earn more during the warm season. That is to say, money is not always flowing into seasonal businesses. During the slow months, managing and waiting for the invoices to get paid can become challenging for B2B companies. Many businesses with season-oriented experience slow sales with inconsistent cash-flow.

Businesses like restaurants in popular tourist areas, campgrounds, and water sports rentals often slow down when weather changes or tourists head their homes. Luckily, there are smart ways to accelerate cash-flow during slow season. Invoice factoring, in the meantime, offers an excellent solution to cover the gap between expenditures and income. To understand how it helps businesses get through their downtime, it is essential to understand what invoice factoring is.

What Is Invoice Factoring?

As the name refers, invoice factoring is one of the means to get finances or funds by using unpaid invoices. Commonly known as, accounts receivable financing, it is a method that gives businesses an advance on the invoices their customers have not yet paid.

For seasonal businesses, it makes a lot of difference in maintaining healthy cash flow when sales are down. Because seasonal businesses often struggle with insufficient cash-flow, opting for invoice factoring can help them not only invest in inventory but also upgrade existing pieces of equipment. It keeps seasonal businesses running smoothly by helping entrepreneurs paying bills and paying off their debts.

How Invoice Factoring Helps Seasonal Businesses?

As mentioned earlier, invoice factoring is one of the great cash management tools for seasonal businesses. No matter how much profit your business made during high season, if you have not collected the cash on time, or your business still has pending bills to be paid, the cash flow will likely suffer. This is when you need solutions like invoice factoring to play their role. It can help businesses tide over when they need funds and finances. Here are some ways in which invoice factoring can help businesses:

  • Paying Employees Salaries: Encountering payroll problems during low-sales is not something new for seasonal businesses. How will you pay your staff or employees when you’re still waiting to get paid? Many business owners end up using their personal funds when they have insufficient cash-flow to make payroll. They even use their own savings and retirement accounts to pay employee salaries. While some entrepreneurs turn to personal funds, others opt for other means to not only ensure their employees are paid, but also avoid IRS problem, lawsuits, and bankruptcy. Invoice factoring is the safest way to get the amount you need to make payrolls. It ensures that owners of seasonal businesses do not resort the drastic measures.

  • Flexible and easy Cash-flow Solution: Like we said, inconsistent cash-flow during the rough season is one of the major problems seasonal businesses face. Although it might be a short-term problem for well-established businesses, invoice factoring can be of great help when it comes to bridging gaps due to seasonal lulls. Thanks to the invoice factoring companies that offer various flexible programs designed with flexible contract lengths and terms to meet the needs of different businesses. Entrepreneurs have the choice to opt for a full-year or month-to-month program. There are programs that allow you to choose the invoices that you want to factor. What makes Invoice factoring even more appealing is its zero interest and credit rate. That means businesses are not saddled with high debts as they are when they take a loan from a bank.

  • More than a Financial Solution for Seasonal Businesses: Invoice factoring is much more than just an easy financial solution. That means the financial vehicle doesn’t only get your business going during the slow sales but it also facilitates in a number of ways. When a business works with a factoring company, it gets a chance to work with a team of qualified professionals that serve and support the business. The services include invoice collection services, reporting tools, free credit check, and online portals for the customers to maintain 24/7 access with them.

  • Help Seasonal Businesses Launch Marketing Campaigns: A well-designed marketing campaign can fuel the sales funnel when business is going through the off season. But launching a marketing campaign that helps a certain business attract potential customer is not possible without funds. This is another occasion where Invoice factoring can play an important role in helping a business sustain in the respective industry. By factoring the invoices, seasonal businesses can receive the funds to design and launch marketing campaigns to persuade more customers.

  • Free up Businesses Time and Resources: Aside from maintaining cash-flow, Invoice factoring frees up businesses a lot of time and resources. When a factoring company takes over, it frees businesses from having to collect the invoices. From making collections to generating reports, the professionals do everything. This helps businesses redirect their attention from the collection process to several important aspects of business, such as marketing, research, and customer support.

Furthermore, the non-resource factoring doesn’t need businesses to take on debts as it is different from a loan. It is precisely the sale of unpaid invoices to fulfill the need of immediate cash. Seasonal businesses can opt for this solution not only when the sales are slow but also when they need finances for expanding a business. All in all, Invoice factoring is undeniably as useful for seasonal businesses as it is for other business having adequate sales all round the year. It can be a great finance solution for the seasonal business for:

  1. Paying staff salaries

  2. Paying pending bills

  3. Buying equipment

  4. Increasing business

  5. Purchasing inventory

  6. Upgrading or maintaining existing equipment

  7. Launching marketing campaigns

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