Charter Capital

Tag: invoice factoring

Invoice Factoring is a when a business sells its accounts receivable to a third party at a discount.

  • Handling Payment Delays as a Government Contractor

    Handling Payment Delays as a Government Contractor

    Explore how factoring provides a reliable bridge to ensure consistent cash flow.

    Government contracts can be challenging to win and navigate, but they’re also some of the most lucrative and dependable contracts you can have. On this page, we’ll walk you through why you may experience delayed payments and cash flow challenges and how government contractor factoring creates a financial bridge that allows you to bid on, accept, and manage these contracts more confidently.

    Navigating Payments in Government Contracting

    For the most part, the government must pay contractors on net 30 terms, as Wolters Kluwer notes. This means you’re paid within 30 days or less of submitting your invoice, but it doesn’t necessarily mean you’ll get paid when you expect. While prompt payment terms are intended to keep contract obligations running smoothly, delays can still occur due to missing documentation, incorrect banking information, or disputes over the services performed as specified in this contract.

    Payment Terms Vary by Contract

    As you explore government contract opportunities, pay close attention to the payment timing mentioned. There are many different payment timelines. For instance, some offer progress payments or pay by milestone, in which case you can submit your invoice as soon as you’ve met the requirements or milestones. Others, especially those involving tangible goods, may allow you to submit an invoice immediately after delivery. You’re also likely to see monthly billing terms on service-type contracts. This means that even if you’re promised net 30 terms, you may not get paid within 30 days.  

    To illustrate, picture a website development company that wins a bid for designing a new website for a government agency. It’s an expansive project with dozens of professionals that is expected to take a full year.  Rather than paying out only at the end, the developer may have a milestone-based contract that provides payments as the company meets specific goals. Now, imagine it takes the developer 90 days to meet its first milestone, and it sends the invoice right away. Because the government has 30 days to pay, a total of 120 days may pass from the time the business makes its first cash outlay for the project until the day it receives cash.

    Public Sector Contracts May Not Always Pay “On Time”

    As you can see, this already creates a wide range of payment timelines, but there are lots of other reasons why a net 30 timeline may not always pan out.

    Work Disputes

    Occasionally, there may be a dispute about whether you’ve delivered services or goods as outlined in your contract. This must be resolved before the invoice is approved for processing.

    Incorrect Invoicing

    The 30-day timeline only begins when the government receives a “proper” invoice. Although there are many reasons why invoices get kicked back for non-compliance, a few of the most common issues include issues with:

    • Dates
    • Contract numbers
    • Company name and address
    • Contact info for the person receiving the payment
    • Shipping and payment terms
    • Details about the items or services delivered

    The government has seven days after receiving your invoice to respond if invoice issues will prevent payment. Unfortunately, businesses can go back and forth quite a bit while issuing corrected invoices, which may further delay the payment.

    Common Payment Delays in Government Contracts

    Understanding the contractual provisions in a federal contract is essential for any federal contractor, as terms related to designated payment, invoice amount, and liability for overdue payments can impact how agencies make payments and manage obligations.

    Navigating FAR Parts and Payment Regulations

    Federal Acquisition Regulation (FAR) parts are essential for understanding the payment processes in government contracts. The prompt payment clause requires payment within 30 days of receiving a proper invoice, but various factors can still cause delays. Familiarity with FAR parts and specific clauses helps contractors navigate payment challenges and seek remedies for compensable delays.

    Impact of Late Payment Interest on Cash Flow

    Late payment interest is critical for managing cash flow. When the government delays payment beyond the due date, interest is owed. Contractors should track payment dates, delay periods, and notify the contracting officer promptly to claim late payment interest, thus mitigating financial strain.

    Payment Delays Can Create Major Issues for Businesses

    Many small businesses and startups are dissuaded from bidding on government contracts because they lack the upfront cash necessary to accept these projects, particularly when payment delays are likely.

    Effects of Payment Delays

    Government contractors experience a variety of issues when payments are slow, such as:

    • Added expenses and time for chasing and resubmitting invoices
    • Inability to cover their own expenses, such as rent and payroll
    • Inability to continue working on the project due to capital needs
    • Inability to seize opportunities due to limited capital

    Strategies to Manage and Mitigate Payment Delays

    Effective Contract Administration Tools and Techniques

    Effective contract administration is vital for managing payment delays. Utilizing automated systems for tracking invoices and maintaining detailed records of communications helps prevent delays. Proactively addressing issues ensures timely submission and approval of invoices, avoiding administrative oversights.

    Handling Termination and Late Payments

    When facing termination or late payments, contractors must notify the contracting officer in writing, detailing delays, costs incurred, and impacts on performance. Understanding contract terms and documenting issues is crucial for seeking compensation and managing financial impacts.

    Factoring: The Bridge Over Financial Gaps

    Large and established contractors can often tap into loans and lines of credit when accepting bids. However, many are debt-averse and prefer not to. Moreover, liquidity solutions are few and far between for those in the early days of government contracting because they don’t typically meet the history and credit requirements. This is where a solution like factoring can help.

    Factoring: A Reliable Solution for Government Contractors

    Addressing Late Payment Issues with Factoring

    Factoring provides a solution for late payments by offering immediate cash flow through the sale of unpaid invoices. This helps contractors maintain operations without waiting for government payments, especially when facing government-caused delays.

    Benefits of Factoring for Federal Construction Projects

    Factoring benefits federal construction projects by providing immediate cash flow, simplifying financial forecasting, and allowing contractors to cover expenses and continue work without delays. This predictability aids in better budgeting and planning.

    Factoring Solutions Tailored for Government Contractors

    Factoring is a unique funding solution in which your business sells its unpaid invoice to a factoring company like Charter Capital at a slight discount. The factoring company immediately pays you most of the invoice’s value and takes over responsibility for collecting the payment. You’re free to move forward without chasing payments or paying a debt back.

    How Factoring Works

    Factoring is a straightforward process for government contractors.

    • Step 1: Win a government contract and go to work.
    • Step 2: Send copies of the invoice to the government and your factoring company.
    • Step 3: Get paid most of the invoice’s value immediately by the factoring company.
    • Step 4: Keep working and growing your company. The factoring company will follow up on the invoice as needed and send you the remaining sum minus a small factoring fee once the government’s payment comes in.

    Eligibility for Factoring

    Unlike loans, lines of credit, and other traditional funding solutions, your creditworthiness and time in business aren’t a major consideration for approval. Instead, the factor is more concerned with the creditworthiness of your customers since they’re the ones paying the bill. This means getting approved is very easy if you’re working on a government contract. You may be able to factor invoices for many of your private sector clients, too.

    Benefits of Factoring vs. Waiting

    There are lots of benefits to leveraging government contractor factoring. We’ll explore a few below.

    Immediate Cash Access

    Your business receives payment right away with factoring. It’s typically sent as an automated clearing house (ACH) payment, which means it’s sent electronically and arrives in your bank account within 24-48 hours. However, factoring companies like Charter Capital can expedite it even more beyond this and pay you on the very same day you submit your invoice.

    Continuous Business Operations

    Factoring bridges cash flow gaps so you can cover daily expenses and grow.

    Simplified Forecasting

    With factoring, you always know exactly when you’ll get paid so that you can budget more confidently.

    Planning for Future Contracts

    Factoring doesn’t have to be all or nothing. You can dip into it whenever you need to accelerate cash flow. This often opens doors for government contractors as they explore opportunities – you can bid on the projects that suit you and not just the ones that pay out on your ideal timeline.

    Eligibility and Benefits of Factoring for Government Contractors

    Criteria for Factoring Approval

    Approval for factoring primarily depends on the creditworthiness of the government entity. Contractors should ensure invoices are free from disputes and meet contract specifications to expedite the approval process and access factoring benefits quickly.

    Factoring vs. Traditional Financing Options

    Factoring offers immediate cash flow without adding debt, unlike traditional loans. It is flexible, allowing contractors to factor specific invoices as needed, which is particularly beneficial for managing federal construction contracts with varying payment schedules.

    Practical Steps to Implement Factoring in Your Business

    Selecting the Right Factoring Company

    Choosing a reputable factoring company experienced in government contracts is crucial. Consider advance rates, fees, and payment speed, and ensure the agreement aligns with your needs to maximize the benefits of factoring.

    Maximizing Cash Flow with Same-Day Payments

    Same-day payments from factoring companies ensure funds are available immediately, helping contractors meet financial obligations without delay. This is especially beneficial for managing cash flow during government-caused delays.

    Bridge Your Financial Gaps with Government Contractor Factoring

    If it sounds like government contractor factoring may be what you’re looking for to bridge financial gaps, Charter Capital can help. We offer low rates, up to 100 percent advances, same-day payments, and don’t require long-term contracts. To explore the fit for your business, request a complimentary rate quote.

  • Rapid Business Growth Increases Failure Risk, Report Shows

    Rapid Business Growth Increases Failure Risk, Report Shows

    Challenges associated with rapid growth cause two-thirds of fastest-growing companies to shrink, stagnate, or fail.

    April 16, 2024, Houston, Texas— Leading invoice funding company, Charter Capital, says businesses experiencing periods of rapid growth are less likely to thrive than their counterparts. Complete coverage of the topic is available in “How to Solve the Financial Challenges of Rapid Growth with Factoring,” now live on charcap.com.

    The report draws on an analysis of Inc.’s 500 fastest-growing private companies, noting that fast growers perform worse than their counterparts five to eight years after making the list. In all, two-thirds shrink, stagnate, or fail.

    “Most business owners are focused and trying to grow,” Gregory Brown, Co-founder and Executive Manager at Charter Capital, explains. “But they’re not always prepared for the dynamic shift that comes with rapid growth and how that brings cash flow issues and other challenges to a head.”

    Brown notes that businesses often struggle to meet increased demand between needing to onboard new employees, the increased workload, unscalable processes, and additional supply requirements. This frequently results in issues like reduced quality, increased customer complaints, and accelerated customer attrition. As customer needs continue to go unmet, the company’s reputation takes a hit, and sales volume drops – sometimes to an unrecoverable level.

    “A working capital injection can help businesses meet increased demand without sacrificing quality or service,” Brown continues. “Yet, small businesses are underserved by the traditional banking community, so they often try to push through like they always have. It just doesn’t work when sales volume is rapidly climbing.”

    Brown contends that alternative funding solutions like invoice factoring are ideal in these situations because they don’t have the same criteria for approval. Rather than taking out a loan, the business can accelerate payment on its B2B invoices by selling them to a factoring company at a slight discount. Because it works differently than loans, most businesses qualify. Moreover, the cash advance comes from money the business has already earned, so there’s no debt to pay back – a boon for forward-thinking companies that don’t want to be held back by debt payments as they grow.

    Those interested in learning more about invoice factoring or who would like to request a complimentary quote may do so by calling +1-877-960-1818 or visiting charcap.com.

    About Charter Capital
    Headquartered in Houston, Texas, Charter Capital has been a leading provider of flexible funding solutions for the B2B sector for more than 20 years. Competitive rates, a fast approval process, and same-day funding help businesses across various industries secure the working capital necessary to manage daily needs and grow. To learn more, visit charcap.com or call +1-877-960-1818.

  • Small Business Expansion Halted as Optimism Falls Below Half-Century Average

    Small Business Expansion Halted as Optimism Falls Below Half-Century Average

    For the 25th consecutive month, small business optimism remains below the 50-year average, with only eight percent believing it’s the right time for growth.

    February 27, 2024, Houston, Texas— Leading invoice funding company Charter Capital says there’s a significant divide in the optimism small business owners feel about growth in today’s economy. Further insights are available in the report “Business Expansion Timing: How to Know When to Grow,” which is accessible on charcap.com.

    The Charter Capital report echoes sentiments business owners shared in the recent NFIB Small Business Optimism Index, which shows optimism is down two percentage points. This places optimism eight points below the 50-year average at a mere 89.9. While 14 percent plan to increase employment and 23 percent have plans to make capital outlays, just eight percent say this is a good time to expand.

    “Given today’s economic conditions, a cautious approach to business growth is understandable and warranted,” explains Gregory Brown, Co-founder and Executive Manager at Charter Capital. “However, the findings are not universal, and each business needs to perform its own assessment.”

    Brown notes that businesses may still spot signs of readiness, such as having a solid customer base that demands more, as well as consistent revenue growth and profitability. When paired with stable and strong operational processes and a prepared team, businesses may be able to scale successfully despite the economic concerns. Spotting the signs and moving forward with the right resources and strategy in place may allow businesses to gain a competitive advantage as competitors hold back.

    “Only one in four businesses report that their funding needs are fully met,” Brown says. “This is a crucial element in business success whether expansion is on the table or not.”

    He adds that many small businesses are reporting greater difficulty in obtaining working capital via traditional lending, though he contends that alternative funding options, such as invoice factoring, remain viable solutions. Rather than taking out a loan, the business receives immediate payment on its outstanding B2B invoices. Through factoring, businesses can receive 90 percent or more of an invoice’s value upfront and don’t accrue debt because the balances are cleared when clients pay their invoices.

    Those interested in learning more about invoice factoring or who would like to request a complimentary quote may do so by calling 1-855-336-1473 or visiting charcap.com.

    About Charter Capital
    Headquartered in Houston, Texas, Charter Capital has been a leading provider of flexible funding solutions for the B2B sector for more than 20 years. Competitive rates, a fast approval process, and same-day funding help businesses across various industries secure the working capital necessary to manage daily needs and grow. To learn more, visit charcap.com or call 1-855-336-1473.

  • How to Solve the Financial Challenges of Rapid Growth with Factoring

    How to Solve the Financial Challenges of Rapid Growth with Factoring

    How to Solve Rapid Growth Challenges with Factoring

    Rapid growth may seem like every entrepreneur’s dream, but it often creates more problems than it solves. In fact, an analysis of Inc.’s 500 fastest-growing private companies shows that five to eight years after making the list, fast growers perform worse than their counterparts, Inc. reports. Perhaps more concerning, two-thirds shrink, stagnate, or outright fail.

    On this page, we’ll explore why this happens, including some of the pitfalls of rapid growth, red flags that signify you may have a problem, and how leveraging factoring for business growth challenges can help.

    Financial Challenges Associated with Rapid Business Growth

    More often than not, it’s the financial challenges associated with rapid business growth that create issues and seep into virtually all business activities.

    Overhead Increases

    Businesses may anticipate increased expenses for things like inventory, but they don’t always see increases in overhead expenses coming. For instance, utility bills, materials, and salary expenses often increase. Many businesses must also upgrade their space to have more room for storage, manufacturing, or back-office processes as well. 

    Poor Management

    Business leaders, especially small business owners, wear many hats during the startup phase. You’re not merely the strategic visionary. You’re managing daily activities, the head of HR, the person chasing unpaid invoices, and so forth. It’s easy to become overwhelmed in these situations and impossible to ensure that each task gets the attention it deserves.

    Many red flags can signify management is going downhill. However, you’re likely having issues in this area if your business experiences surprises, such as unexpected peaks in unpaid invoices or emergency cash flow shortfalls that need immediate attention.

    Trouble Meeting Demand

    If your business is struggling to fulfill orders that have already been placed, or you’re turning down work because you lack the resources to fulfill them, it’s safe to say you’re having trouble meeting demand.  

    Without a proper business expansion plan, this usually results in one or more of the following scenarios:

    • Reduced Quality: Brands ramp up production to meet demand, but quality decreases.
    • Increased Customer Complaints: Customers become upset with long waits and poor quality and begin to complain.
    • Increased Attrition: Without a strong customer retention strategy, the business begins losing customers.
    • Reduced Volume: Demand for products and services declines because customer expectations are unmet.

    People Problems

    Rapidly growing businesses often fail to define their company structure, or it changes so much that people don’t know what to expect. For instance, people may report to multiple managers or may not receive the communication they need to perform their job well. This creates low morale, burnout, and employee attrition, impacting all business aspects.

    To fill these gaps and those created by business growth, the company hires rapidly, often bringing people on who are not a good fit for the role or company culture.

    Red flags your business is dealing with this include an increase in HR complaints, poor results from employee surveys, and high attrition rates.

    Too Much Focus on the Short-Term

    Many business owners, especially first-time founders, learn on the job. That can work when things are slow, particularly if the owner builds a strong team with experienced professionals. However, it’s virtually impossible to keep up with all the changes and adjust strategies when everything changes quickly.

    • Decisions Based on Feeling: Rather than making decisions based on thorough analysis, decisions are based on feelings and personal desires. For instance, you might develop a product or service based on what you believe people want or how you’d use something instead of what others do.
    • R&D Focused on Short-Term Gains: Rather than developing strategies your business can leverage in the long run or grow into, you spend your R&D investments on immediate gains.
    • Borrowing without Planning: Rather than developing a long-term growth strategy that puts loans toward vetted growth initiatives, the business borrows large sums or stacks loans that are used for immediate needs that it cannot pay off.

    Red flags can vary here, though businesses often struggle with cash flow management and meeting customer demands. There’s also often considerable waste. For instance, the business may not fully utilize its team or space, and inventory may go unused.

    Problematic Cash Flow Management

    All the issues outlined so far can make it difficult to predict cash flow and create and stick to budgets. Over 80 percent of small business failures are tied to poor cash flow management, Small Business Trends reports.

    Leveraging Factoring for Business Growth

    While there are many financial solutions businesses can leverage, invoice factoring offers unique benefits that make it ideal for growth funding.

    Rather than taking out a loan that your business may struggle to repay later, factoring provides instant payment on your outstanding B2B or B2G invoices.

    Rapid growth can create complex financial challenges for any business, including those in the security industry. This is where security factoring comes into play as a reliable solution. By leveraging the value of unpaid invoices, security companies can secure immediate funds needed to meet payroll, hire additional guards, and handle increased operational costs. Factoring offers a flexible way to maintain financial stability and avoid the pitfalls of debt, making it a preferred choice for firms experiencing rapid expansion.

    Similarly, staffing agencies facing rapid expansion can benefit from payroll funding through invoice factoring, ensuring they have the necessary working capital to cover wages without cash flow disruptions.

    Factoring Works Even if You’re Still Building Credit

    Most business funding options only work for businesses with strong credit scores. Invoice factoring doesn’t rely on your credit and may even help you improve your credit score.

    You Receive Working Capital Instantly

    Factoring makes it easy to cover unexpected expenses because you can tap into it as needed, and funding is instant. While this typically means you’ll receive payment within a couple of days, Charter Capital goes the extra mile and can provide same-day payments.

    It Does Not Create Debt

    It’s very easy for rapidly growing businesses to become buried in debt, especially when volume begins to decrease. At this stage, it eats up a significant portion of profit even though the business may only be paying interest and fees and not paying down the principal. Factoring helps companies avoid this fate because it doesn’t create debt. The balance is paid off when your customer pays their invoice.

    Factoring Simplifies Cash Flow Management

    Effective cash flow management begins with creating accurate financial projections. That’s difficult to do when cash inflows are unpredictable and outflows are rising. Invoice factoring takes the guesswork out of it by stabilizing cash flow. You know precisely when you’ll get paid, so you can create a budget and stick to it.

    You Can Focus More

    Decision-making falters when business leaders are stressed and tackling too many things. When you factor, your factoring company collects balances to save you the time and trouble of chasing invoices. You’re also likely to feel less stressed because issues like customer bad debt are reduced, and you can focus on business strategy more.

    Get Started with Factoring for Business Growth

    With more than 20 years of experience, tailored services to meet your unique needs and competitive rates, Charter Capital can help. If your business is facing challenges due to rapid growth, request a complimentary invoice factoring quote.

  • Unlocking Financial Agility: How Invoice Factoring is Revolutionizing Small Business Finance

    Unlocking Financial Agility: How Invoice Factoring is Revolutionizing Small Business Finance

    More small business owners are turning to invoice factoring to cope with economic challenges, a new report shows.

    January 30, 2024, Houston, Texas—Leading invoice funding company Charter Capital says small business factoring is a key strategy among small business owners coping with some of the most significant economic challenges today. Additional coverage of the topic can be found in “Our 7 Favorite Things About Factoring,” now live on charcap.com.

    The report draws on JP Morgan research, which indicates one in four small businesses has just a 13-day cash reserve. With such a small cushion, it doesn’t take much more than a single late payment from a client or unexpected expense to upend plans for even the most meticulous budgeter.

    “Invoice factoring pays out quicker than most funding options,” explains Joel Rosenthal, Co-founder and Executive Manager at Charter Capital. “This makes it ideal for businesses that need to cover critical expenses and don’t have time to wait.”

    He says invoice factoring is unique because it quickly turns unpaid B2B invoices into cash. While this usually means cash reaches the business’s account within a couple of business days, Rosenthal says interest in Charter Capital’s same-day funding options has surged due to the current economic climate.

    He notes that the ability to obtain funding without taking on debt also appeals to small business owners. This aligns with data from the latest Small Business Credit Survey, which indicates that one in three small businesses is having trouble making payments on debt.

    “The high interest rates seen today are making more small businesses debt-averse,” Rosenthal continues. “They’re funneling everything they have into paying down debts, especially those with variable APRs that have become much more challenging to pay off. Being able to obtain funding without adding to that burden is a huge relief.”

    Rosenthal adds that factoring is also flexible, which means businesses can tap into funding as needed. This enables businesses to fill working capital gaps as they emerge and accept orders they might have otherwise turned down due to cash outlay requirements. Because of this, factoring is quickly becoming part of many business growth strategies, too.

    Those interested in learning more about invoice factoring or who would like to request a complimentary quote may do so by calling 1-855-751-7937 or visiting charcap.com.

    About Charter Capital

    Headquartered in Houston, Texas, Charter Capital has been a leading provider of flexible funding solutions for the B2B sector for more than 20 years. Competitive rates, a fast approval process, and same-day funding help businesses across various industries secure the working capital necessary to manage daily needs and grow. To learn more, visit charcap.com or call 1-855-751-7937.

  • Our 7 Favorite Things About Factoring

    Our 7 Favorite Things About Factoring

    Our 7 Favorite Things About Factoring

    If your business needs to accelerate customer payments, experiences cash flow gaps or faces unexpected expenses, invoice factoring can be a lifeline. It’s a form of alternative business funding that allows you to sell your unpaid receivables at a discount to a third party and receive instant payment. Most businesses are approved, even if they’re newer or don’t qualify for a loan, because factoring doesn’t rely on the same rigid criteria that banks use. This makes it a very unique funding solution, but it’s only the start of what sets it apart. On this page, we’ll share seven of our favorite things about factoring so you can better understand how it works and how it might benefit your business.

    1. You Receive Immediate Access to Capital

    Around a quarter of small businesses have less than a 13-day cash reserve, according to JP Morgan. In these situations, something as small as a single late customer payment or unexpected expense can make it impossible to cover critical expenses like payroll and inventory.

    Most traditional funding solutions are not designed for these kinds of situations. It can take weeks to get approved. Months may pass before the business receives the payout. Invoice factoring is different. If you’re diligent with documentation, your initial approval will usually arrive within days, if not sooner.

    Moreover, businesses typically receive their advances within two business days, deposited directly into their bank accounts. You may also qualify for same-day payments when you work with a factoring company like Charter Capital. Because factoring offers immediate access to capital, it’s often the best funding solution for businesses that need a quick injection of capital to maintain normal operations or bid on a project.

    2. Your Business Doesn’t Accrue Debt

    Although debt can sometimes be helpful, particularly when it empowers the business to grow and boost its credit score, issues relating to debt management have been increasing in recent years. Around one-third of small businesses say making debt payments is a challenge, according to the latest Small Business Credit Survey. Close to two-thirds indicate their business is in fair or poor financial condition.

    Invoice factoring doesn’t create debt. The advance is paid off automatically when your customer pays their invoice. You’re free to move forward without worrying about making extra payments and may even improve your credit score due to the increased ability to make timely payments.

    3. It Improves Customer Credit Management

    Slow and delinquent payments are a common issue for small business owners. Around ten percent of payments are either never paid or paid so late that the business has no choice but to write them off as bad debt, CPA Practice Advisor reports. It’s more than a nuisance. These issues impact your ability to make payments and increase time spent chasing invoices. Research also shows that business borrowing increases with slow and late payments, per Insightful Accountant. This means the payment behaviors of your clients directly impact your debt and overall financial health.

    Thankfully, factoring addresses these issues in a couple of different ways. First, your factoring company runs credit checks on your clients before factoring invoices. You learn how much credit you can extend to each client without exposing your business to unnecessary risks. Secondly, your factoring company collects the balances for you, so invoices are typically paid much quicker. You’re far less likely to have to write balances off as bad debt, too.

    It’s also worth noting that you don’t have to change your payment terms to achieve these benefits. If giving your customers a longer payment window helps you maintain stronger relationships or win more bids, you can keep doing this and still benefit from improved cash flow.

    4. You Gain Financing Flexibility

    Factoring helps keep businesses agile. You can use it as needed for virtually any situation. For instance, some leverage it to fill cash flow gaps as their business grows, while others factor invoices as they ramp up to meet seasonal demands or fulfill larger orders.

    It’s also one of the few funding solutions that automatically scales with your business. As your invoice values or volume rises, your access to capital rises with it. Plus, you can use it when you want. You don’t need to factor all your invoices or factor all the time, so you have more control over your cash and how you put it to work.

    5. It Fuels Growth

    Capital from invoice factoring can be used to fund growth-related initiatives such as business expansion, launching new products, and marketing campaigns. Charter Capital clients have achieved significant results through factoring, such as doubling their client base and growing 56 times bigger in just a few years, case studies show.

    6. It Gives You Time Back

    More than two-thirds of small businesses spend 14 hours each week on administrative tasks related to collecting payments, QuickBooks research shows. Because your factoring company collects for you, your company gets much of this time back. Put it toward growth-related activities, customer-focused tasks, and more.

    7. You Gain an Experienced Partner

    When you work with an invoice factoring company like Charter Capital that knows your industry, you gain an experienced partner who can help your business reach new heights. Your team may be able to help you address growing pains, provide financial advice, provide additional services, and link you up with other pros who can streamline your operations and grow a stronger company.

    Maximizing Business Growth with Invoice Factoring

    When it comes to business, achieving a steady cash flow and immediate access to capital are critical factors that drive growth and operational efficiency. Invoice factoring, a powerful form of accounts receivable financing, stands out as an essential tool for businesses aiming to bridge the gap between billing and payment periods. By leveraging factoring services, companies can instantly convert their accounts receivable into working capital, providing a lifeline to improve liquidity and fund expansion without incurring debt. Factoring allows businesses to sell their outstanding invoices to a factoring company at a discount, thus receiving immediate funds usually within 24 hours. This process improves cash flow and reduces overhead costs associated with chasing down payments, thereby improving operational efficiency. One of the advantages of factoring accounts is its ability to provide flexible financing solutions that adapt to the company’s growth, unlike traditional loans, which might involve lengthy approval processes and monthly payments.

    Furthermore, factoring offers a strategic advantage for businesses in need of short-term cash solutions. It benefits businesses by alleviating the burden of debt collection and improving credit management. Factoring companies assess the creditworthiness of your customers rather than your business, offering a unique form of financing that can be particularly beneficial for new businesses or those with less-than-perfect credit. Non-recourse factoring further enhances this benefit by protecting businesses against the risk of customer default.

    Factoring services also contribute to a business’s competitiveness in various industries by ensuring liquidity is available to pay invoices, purchase inventory, and even take on new projects. For example, businesses like security guard firms can benefit from security factoring, which helps maintain steady cash flow despite delayed payments from clients. The immediate cash provided through factoring can help companies manage their balance sheets more effectively, fund significant portions of their operations, and utilize immediate funds to meet their short-term needs. It’s a transaction that facilitates immediate payment on outstanding receivables and offers a pathway to growth and financial stability without relying on traditional debt financing.

    Learn more about the benefits of factoring and how factoring can help companies to not only survive but thrive in today’s competitive market. Factoring provides a non-traditional loan alternative that improves cash flow, enhances liquidity, and supports business expansion. Contact Charter Capital to discover how factoring works and to explore a factoring agreement tailored to your business’s unique needs. Factoring helps businesses pay their invoices on time and continue their journey toward success without the financial strain tied up in unpaid receivables.

    Request a Free Charter Capital Invoice Factoring Rate Quote

    With decades of experience, experience across a wide variety of industries, and competitive rates, Charter Capital can help your business reach the next level through invoice factoring. If factoring sounds like the ideal business funding solution for your needs, request a free rate quote.

    7 Benefits of Factoring with Charter capital infographic | Our 7 Favorite Things About Factoring
  • 11 Common Startup Mistakes First-Time Founders Make

    11 Common Startup Mistakes First-Time Founders Make

    11 Common Startup Mistakes First-Time Founders Make

    Starting a business is not for the faint of heart. One in five fails within the first year and half close within five years, Investopedia reports. Less than one-third make it to ten years. While these statistics may seem grim, most of these closures can be directly attributed to just a few common startup mistakes. On this page, we’ll walk you through some entrepreneurial challenges you’ll likely face in the early years and how to avoid the business founding mistakes that trip most people up.

    1. Having a Product or Service That Doesn’t Solve a Problem

    You may see the value in what you’re offering, but do others? Often, people close to a business don’t realize there’s no market for their product or service. Think critically about what happens when you tell others unfamiliar with your company what you do.

    • Do people seem confused by the concept?
    • Do people stay mostly quiet or clam up beyond giving basic congratulatory messages?
    • Do you spend a lot of time explaining what you do or how it works?

    If so, there might not be a market for your product or service. Consider doing more market research to see if there is a way you can adjust your offering to fill an unmet need.

    2. Following Bad Advice

    Everyone will have advice on how you should run your company. However, most people will have no experience running a successful startup. Skip the advice from well-meaning friends and family.

    It may be helpful to connect with other entrepreneurs but remember that they’re also experiencing a large learning curve. Even if someone has found something that works for them, that doesn’t mean their solution is viable in the long run or isn’t creating more problems they haven’t discovered yet. Take this advice with a grain of salt.

    If you’re stuck, defer to an expert. That may mean bringing in finance pros, tax specialists, lawyers, consultants, and more. Also, keep a pulse on your customers. While they may not be able to help you run a profitable business, they are experts in knowing what they want and need.

    3. Not Scheduling Downtime

    The average CEO works close to 12 hours per day, according to Harvard Business Review. In the tech industry, CEOs clock 14-hour days, First Round reports. People can’t sustain this kind of momentum in the long run. It impacts stress and sleep, which often leads to needless mistakes and burnout.

    You may be thinking that the extra hours are essential. You have work to get done. However, the hard truth is that you probably aren’t getting more done when you put in extra hours. Productivity declines sharply at the 50-hour mark. People who work 70 hours per week are no more productive than they would have been if they’d worked 55 hours, CNBC reports.

    Schedule your days in a way that ensures you get time away to rest and rejuvenate. Your performance, and therefore likely business performance, will be better as a result.

    4. Hiring Too Fast

    First-time founders are usually eager to begin hiring. Bringing in extra bodies can help your business grow and allow you to delegate more tasks. However, when businesses hire too fast, they often wind up with people problems such as:

    • Employees who aren’t a good fit for their role.
    • A lack of culture fit.
    • Slow or poor onboarding and training.
    • More employees than needed.

    Bring on newcomers strategically. Evaluate outsourcing specific tasks or processes before creating full-time roles. When you do hire, choose the roles you fill carefully and try to resist the urge to hire someone simply because they’ve worked at a startup before. Evaluate each candidate’s skills, knowledge, and culture fit before moving forward.

    5. Not Defining Job Roles

    You’ve probably seen job descriptions, or maybe even written ones, that ask for a “rockstar” or “Jack of all trades.” This tends to be code for: “I want someone who can do everything.” Unfortunately, nobody is good at everything, and those who try to do it all for you will wind up burning out.

    Instead, create clearly defined job roles. This will make it easier to find the right person for each role, ensure their deliverables are understood, and help you measure their success in the role.

    6. Overestimating Revenue

    It isn’t easy to gauge how much money a business will make when it’s just getting started. While you can leverage market data and compare similar businesses, you’re still using figures generated by established companies to create your projections. Generating brand awareness and developing an audience takes a considerable amount of time. During this time, you’re also developing processes and building the infrastructure to do business, which may impact how much work you can take on and the resources you have to apply to growth initiatives.

    Expect a very slow start and give your business time to ramp up. If you’re unsure what this looks like for your industry or business, connect with a consultant who does.

    7. Forgetting to Build Scalability into Processes

    Startups tend to develop processes as they go. For instance, you may be managing several departments as a founder. That means you’ve probably set up all emails and online lead generation forms to forward directly into your inbox. You process these things using your preferred methodology, and then they “evaporate.” There’s no trail to show what you’ve done. All information is stored in your head. Nobody but you knows what happened or what else the person might need. This is common with most business processes in a startup. It creates major headaches as the business grows and more team members are brought in.

    As you develop your internal procedures, consider how things will need to be handled as you grow. Try to develop processes that will scale with you and get the systems in place early. That means you’ll probably need tools like customer relationship management (CRM) and accounting software. As an added benefit, you can use these tools to begin automating many of your processes now. It’ll save you time and allow you to focus on growing your business.

    8. Underestimating Costs

    Remember when you moved into your own home for the first time? There were so many things to buy. The costs, from linens to cleaning supplies and paying utilities, really added up. It’s the same way when you’re starting a business.

    Make a detailed list of potential expenses and carefully check your estimated costs. It’s also helpful to leave yourself a cushion to ensure you have cash for unexpected expenses and build an emergency fund.

    If you’re planning to bring on freelancers or independent contractors, make sure you understand how that affects your budget, too. While you won’t have to carry the expenses of traditional employees or directly pay a portion of their premiums, health insurance for independent contractors can be pricey, and contractors often charge higher rates to help offset those and other self-employment costs.

    9. Not Managing Cash Flow Effectively

    The top reason businesses fail is because their money ran out, Investopedia reports. Note that this is an entirely different problem than a lack of profitability. If you have expenses that need to be paid but won’t have the cash for another month when your clients pay their invoices, your business will be in trouble.

    Perform cash flow projections and monitor your cash flow at least weekly. Maintain your cash cushion and set up a backup funding source like invoice factoring to ensure you can close cash flow gaps before they become a problem.

    10. Growing Too Fast

    Rapid growth is often viewed as a champagne problem, but it can be quite serious because you’re trying to cover today’s higher expenses with yesterday’s lower revenue. You may not have the infrastructure or resources to ramp up quickly either. This is when companies start having problems like coming up short at payroll, not having cash to procure supplies, and feeling tempted to hire without a strategy. Customer satisfaction often falters, too, which can damage your company’s reputation.

    If cash flow issues are holding you back from taking on more work, your reserve and backup funding can allow you to push forward. If you’re missing the processes and infrastructure to level up, limiting the amount of work you accept may be better until you’re ready for it.

    11. Failing to Pivot

    You probably started your business with a vision and determination to make things work. Perseverance is crucial, but knowing when to let go of your plans and pivot is equally important.

    Monitor the market and how people respond to your offerings, finances, and organizational processes. You will need to refine these strategies as your company grows. It’s not a failure to change things up. It’s resilience, and it can help ensure your business stands the test of time.

    Navigating Startup Challenges: Essential Mistakes to Avoid

    For every entrepreneur venturing into the world of startups, understanding and avoiding common startup mistakes is crucial for laying the foundation of a successful business. From the initial excitement of launching a new business or small business, many founders often overlook the significance of conducting thorough market research, creating a robust business plan, and developing a marketing strategy that resonates with prospective customers. One of the biggest mistakes startups make is failing to monitor cash flow and neglecting continuous feedback, which can lead to a lack of product-market fit and, ultimately, the startup’s failure Additionally, you need to make a business plan that addresses startup growth, customer experience, and the right team composition to ensure the success of your business. Learning from the mistakes and pivots of others, making any needed adjustments, and providing a thorough understanding of the market need are essential steps to avoid the common pitfalls that lead to the statistic that 9 out of 10 startups fail. By focusing on these key areas, new business owners can significantly reduce their chances of making common startup mistakes, thereby enhancing the likelihood of their startup’s growth and long-term viability.

    Avoid Common Startup Mistakes with Invoice Factoring

    Invoice factoring provides instant payment on your B2B invoices, so you can close cash flow gaps and have money as needed for crucial expenses like payroll or ramp-up. It also helps address other issues, such as the time you spend chasing invoices. Plus, it can be a very flexible funding solution when you partner with a factoring company like Charter Capital. Request a complimentary rate quote to get started.

    11 Common Startup Mistakes Infographic
  • 3 Keys to Succeeding in Business: Operations, Relations & Finance

    3 Keys to Succeeding in Business: Operations, Relations & Finance

    3 Keys to Succeeding in Business

    Many people will say that the keys to business success include discipline and perseverance. While these are essential characteristics for business leaders, they’re traits that make the person more successful, not necessarily the business they serve. This page will focus on the trifecta for business: dependable operations, positive customer relations, and mindful financial management. You’ll learn why each matter and get strategies to shore things up in each area.

    Key Strategies for Achieving Long-Term Business Success

    Every successful business understands that the key to success in business lies in a multifaceted approach, blending organizational skills, excellent customer service, and an understanding of both risks and rewards. As a business owner, whether you’re nurturing a new business or striving to keep a running business thriving, it’s essential to grasp these crucial keys to succeed in business. An important key to success is keeping detailed records, allowing for a clear understanding of your business’s financial standing, which is critical to making informed decisions. Moreover, offering great customer service is not just an add-on but a cornerstone of a successful business, helping you achieve a competitive advantage and fostering business growth. Every business must also recognize the importance of the right people – those who share your vision and are dedicated to helping your business grow. These individuals are instrumental in creating a strong team that can respond to the various challenges facing businesses today. In addition, a successful business owner is always looking for ways to improve, whether by enhancing the customer experience, staying on top of organizational tasks, or offering high-quality products or services. Taking calculated risks and making some sacrifices are often part of the journey towards business success. For instance, embracing new technologies or innovative business strategies can be critical factors in helping your business grow and stay ahead in a competitive market. Moreover, understanding labor statistics, market research, and customer feedback provides valuable insights, helping you make strategic decisions that align with long-term goals and create a clear path for growth. It’s also crucial to prepare for potential challenges, whether from business activities or external factors, ensuring your business can survive and from business activities or external factors, ensuring your business can survive and sustain it successfully over time. Remember, the first five years can be the most challenging; however, with the right approach, you can create long-term success, making your company a beacon of success and a testament to the power of dedication and strategic planning.

    1. Scalable and Dependable Operations

    Developing scalable and dependable operations is one of the biggest keys to succeeding in business. This category includes all activities related to planning, organizing, coordinating, directing, and controlling all aspects of your business required to produce goods or services. While many businesses think of this in an administrative capacity, it spans across all departments, from procurement to manufacturing, marketing, and distribution. That means the related expenses are likely to comprise the bulk of your total expenses and will, therefore, considerably impact overall profitability.

    Develop Processes to Enhance Operational Efficiency

    Most businesses develop processes as they go to fill an immediate need. For instance, you might wonder if you have enough working capital to order more supplies and ask your administrative assistant to check your account. This task then becomes the administrative assistant’s duty, whether or not she has a firm grasp on cash flow, payables, or receivables, and you’re likely to stick with it until you face a disastrous outcome that necessitates change or your business expands enough to hire a bookkeeper.

    Small businesses should reevaluate their processes regularly and identify what can be done better or more efficiently and if the current process will scale with the business as it grows.

    For instance, at least 30 percent of activities in 60 percent of jobs can be automated, according to McKinsey. Keep a critical eye on these aspects as you review operational procedures to allow your staff to work more efficiently or produce more without becoming overburdened as your business grows.

    Have Plans for Overcoming Operational Challenges

    Similarly, businesses should have documented plans that cover what to do if specific challenges arise. If you don’t already have a business disaster plan or continuity plan covering supply chain disruption and natural disasters, get one in place now. This will ensure most adverse events don’t impact your operations and that your business recovers quicker when an impact is unavoidable.

    Embrace Technology to Boost Operations

    Nearly nine in ten small businesses report increased efficiency due to technology platforms, according to the U.S. Chamber of Commerce. Keep an open mind about adding new digital tools that may help your business work more efficiently, reduce errors, or produce better results, especially if they make it easier to scale as you grow. 

    2. Positive Customer Relations

    Developing and maintaining strong customer relations is crucial to growth and is one of the crucial keys to succeeding in business because you need to retain customers to increase your customer base, and happy customers can grow your business through referrals and reviews.

    Address Customer Concerns Efficiently

    Customer trust is built through repeated positive interactions: those you have directly with customers and those you see reported by other customers. However, resolving concerns isn’t enough. Customers expect fast resolutions. Maximum response times, per Zendesk, are:

    • Email: 12 hours or less
    • Social Media: 5 hours or less
    • Live Chat: 1 minute or less

    Collect and Act Upon Customer Feedback

    Proactively collect customer feedback and act on it to ensure your customers feel heard and respected. Use the information you gain from customer reports to improve your offerings.

    Foster Customer Loyalty

    Loyal customers are more likely to refer others, spend more, and stay with your company longer. Addressing concerns and requesting feedback will help in this area. You can also boost loyalty through thorough onboarding, continuous nurturing, and dedicated loyalty programs.

    3. Mindful Financial Management

    While most businesses understand that effective financial management is a key to business success, many fail to implement strategies that contribute to this.

    Predict Cash Flow with Accuracy

    Know how to produce a cash flow forecast or procure software that will do it for you. Accurate forecasts will allow you to see when your business might face a cash flow shortfall so you can take corrective action before you run out of cash. It can also help you avoid taking on high-interest loans that might otherwise bury your business in debt.

    Implement Financial Strategies to Boost Cash Flow

    Cash flow is comprised of cash inflows, such as your customer invoices, and cash outflows, such as your vendor payments. You can accelerate and increase inflows or slow and decrease outflows to improve cash flow. It’s important to review all your related processes to ensure your business maximizes cash flow.

    For instance, one method to boost cash flow is to speed up customer payments. You can do this by:

    • Shortening the payment window
    • Sending invoices as soon as goods or services are delivered
    • Making it easy for customers to pay
    • Sending reminders as the due date approaches and after
    • Penalizing late payments
    • Leveraging invoice factoring

    Prepare for Potential Financial Hurdles

    Maximizing your working capital and performing cash flow forecasts can help your business avoid everyday shortfalls, but sometimes unexpected events can derail your plans, too. For instance, equipment may break, or a customer might not pay as planned. It’s essential to prepare for these issues, too.

    Your best defense is to have a business emergency fund ready. Most small businesses cannot afford to set one up all at once. If your business is in this situation, consider treating yours like a bill and set up recurring payments to help build your cushion a little at a time.

    Having a backup funding source ready to go is also a good idea. This can ensure you’re not tempted to take out a loan with bad terms in the event of an emergency. Invoice factoring is often ideal in these cases because you can set up your account and not use it unless you need it. It’s also quite flexible. You’re in control of when you factor and which invoices you choose, so you can keep more money in your pocket and get the right level of funding for any given situation.

    Bolster Your Business Growth with Factoring

    Whether you need working capital to implement any of the ideas outlined here or you want to ensure you can accelerate inflows and have a backup source of funding whenever needed, we can help. To get started, request a complimentary Charter Capital factoring quote.

    3 Keys to Succeeding in Business Infographic | 3 Keys to Succeeding in Business: Operations, Relations & Finance
  • 9 Things That Might be Stalling Your Business Growth

    9 Things That Might be Stalling Your Business Growth

    9 Things That Might be Stalling Your Business Growth

    Is your business growth stalling? Sometimes, the signs are obvious, like when your numbers plateau. Other times, there are warning signs growth is about to stall or that it’s becoming more challenging to sustain your current rates. While this may be dismaying, the good news is that you’re likely catching the problem before it can cause serious harm. Addressing the issues and applying effective business growth strategies will help.

    Below, we’ll walk you through warning signs and common issues that stall business growth so you can get back on track quickly.

    Signs Your Small Business’s Growth is Stalling

    The signs of growth stalling may be apparent in the late stages, but it isn’t always obvious at the start. Here’s what to look for.

    Sales Efficiency is Declining

    If your top salesperson is no longer meeting targets or is struggling to meet them, a growth plateau is on the horizon.

    You Don’t Have a Single Source of Truth

    If you don’t have solid customer data, including who’s visiting your website, clicking your emails, and expressing interest, or your team can’t access this information all in one place, diminished growth is inevitable.

    Your Customers Are Leaving

    If customers are leaving at high rates or as soon as you attract them, your growth will stall or decline.

    Your Team is Leaving

    Small businesses often have an “us against the world” mentality. Early employees live and breathe the company ethos. When those people start leaving, it’s a major sign that something damaging is happening internally that will likely result in slowed growth if it hasn’t already.

    You Can’t Pay Your Bills on Time

    Cash flow issues can be difficult to diagnose at times. For instance, if your business is growing, you’ll usually have a cash flow gap as expenses climb before revenue does. However, if you’re looking at your cash flow projections and don’t see a breakeven point in the near future, your growth is likely slowing.

    9 Things That Could be Causing Your Business Growth to Plateau

    Now that we’ve looked at some signs of slow business growth, let’s explore some of the most common causes and how to fix them.

    1. Your Business Goals or Plan Are Lacking

    A strong business plan includes everything from a detailed market analysis to your marketing strategy and financial planning information. If your business lacks this or actionable goals that correspond with the data, it’s impossible to know where you are or where you’re going.

    Start by crafting a comprehensive business plan and have it reviewed by others you trust. If you’ve already taken care of this step, continue to update your business plan and goals at least once a year.

    2. Your Business Operations or Processes Are Messy or Inefficient

    Could you explain how critical business processes work to someone outside the business and have them understand it? Would they understand your usual customer flow or who handles what at each stage? If you’re unsure, consider your employee onboarding process. Do people quickly understand who is responsible for various activities or who to reach out to for assistance? If not, you find yourself giving lots of reminders, or your employee handbook is loaded with complex instructions, it’s time to improve your business operations and processes.

    Look at each business process individually and how they come together.

    • Are any processes redundant, and can they be eliminated? For instance, do you have employees rechecking work that your computers are doing?
    • Can you automate any steps either using your current technology or by adopting new tech? For example, are your leads automatically receiving the right follow-ups?
    • Can you outsource non-core tasks? For example, allowing your invoice factoring company to handle collections for you or outsourcing your marketing?

    3. Teamwork is Lacking

    Teamwork is linked to increased employee morale, productivity, profitability, and more. If your team works in silos or, worse, works against each other, your business cannot grow. Invest in team building to bring everyone together.

    Effective team-building activities vary but include things like volunteer work, puzzle solving, and scavenger hunts. The key is to ensure everyone can participate, feels valued, and works together to achieve a common goal so that they bring this energy back to the business.

    Additionally, you may need to make internal adjustments to break down silos. For instance, department heads should meet regularly. The resources and tools each department has available should be known to other departments and shared.

    4. People Are Becoming or Setting Up Unnecessary Roadblocks

    It’s often said that a company’s people are its greatest asset. This is generally true, but sometimes those same people become its greatest barrier to success.

    For instance, it’s normal for department heads to fight for greater budgets. However, if certain team members can’t see the bigger picture and understand why the budget is allocated a certain way and brings animosity to the team as a result, their toxicity will be the downfall of the organization.

    Sometimes, long-term employees are resistant to change as well. For instance, someone might be wary of how new technology will impact customer satisfaction. That’s a fair point, and it’s worth hearing the employee out to ensure customer satisfaction doesn’t falter, but if the concerns are unfounded and that person won’t get on board regardless, their negativity will spread.

     Similar issues are seen with fatigued leadership or employees. After 50 hours of work, productivity falls, according to CNBC. If a person hits 70 hours, it’s as if they didn’t even work 15 of them. Moreover, these additional hours impact sleep, health, morale, and quality of life.

    It’s up to you to ensure you and your team are set up for success and create a team that drives your business forward.

    5. You’re Not Focusing on Customer Satisfaction and Retention

    Customer retention does not get enough press. It’s up to 25 times more expensive to attract a new customer than to retain one, according to Harvard Business School (HBS). Their research also shows that boosting customer retention by just five percent can increase profit by up to 95 percent. Make customer retention a priority. A few tips to help include:

    • Thoroughly onboarding new clients
    • Understanding client expectations
    • Request customer feedback and learn from it
    • Incentivize loyalty and referrals
    • Focus on delivering a top-notch customer experience

    6. You’re Ignoring Your Brand Image or Online Presence

    It’s estimated that 27 percent of small businesses don’t have a website, per PR Newswire. This, alone, is a huge loss of potential business, considering that 99 percent of consumers search for local businesses online, according to Statista. More than a third check multiple times each week.

    Setting up a website is the major step in establishing your online presence. Still, it’s important to note that people are likely talking about your business regardless of whether you have a website. If you want to have any control over the narrative and your brand image, your business should be active across review sites and social media, too.

    7. You’re Not Leveraging Data for Improvements in Strategy, Pricing, and Processes

    Up to 73 percent of data goes unused, according to Forrester. This information could tell you more about what your customers want, how to operate more efficiently, pinpoint equipment malfunctions before a complete breakdown, and more.

    Start by exploring the data sources you already have and exploring ways to leverage the data. You can also work with an operations specialist or data scientist to help you better understand the data you already have and identify trends that may help or how to extract more data.

    8. You’re Starting to Blend in with Your Competitors Instead of Standing Out

    Market competition is a challenge for most businesses. How you distinguish your brand, products, and services from others is a key determining factor in whether prospects choose you over them. 

    Refer to your business plan for information on competitive positioning and ensure you’re infusing each step of the customer journey with the data.

    9. You’re Not Tracking and Managing Your Cash Flow

    It’s estimated that 82 percent of business failures are tied to poor cash flow management, according to Forbes. Make sure you create accurate cash flow projections and develop a budget around business goals. If you find yourself short on cash due to growth, and it’s preventing you from seizing opportunities or covering expenses, ensure you have a backup funding source.

    Identifying and Overcoming Growth Stalls in Business

    Business growth often stalls due to a variety of factors like stagnation, valuation challenges, and a noticeable drop in revenue growth. Key steps to counteract this include diagnosing impending stalls through a comprehensive self-test, streamlining business operations, and identifying root causes. For renewed growth, business owners should reassess their growth strategy, focusing on innovation management, adapting to market changes, and exploring new markets. Enhancing product or service offerings, addressing external factors such as competitive challenges, and investing in new paths to success are crucial. Additionally, tackling issues like systemic inefficiency, and dysfunction in the innovation chain, and understanding customer acquisition dynamics can help prevent standstills. By taking a closer look at business operations, making necessary changes, and focusing on organizational strengths, businesses can effectively get back on track and ensure long-term success and profitability.

    Get Your Business Growth Back on Track with Invoice Factoring

    Invoice factoring unlocks cash trapped in your unpaid B2B invoices. Unlike a loan that gets paid back with interest and fees, factoring provides an immediate cash injection that your client pays off when they pay their invoice. This allows you to address cash flow shortfalls and shore up areas that are stalling your business growth without taking on debt. To learn more or get started, request a complimentary factoring quote.

  • Why Loan Stacking is Business Suicide & What to Do Instead

    Why Loan Stacking is Business Suicide & What to Do Instead

    Why Loan Stacking is Business Suicide & What to Do Instead

    Thinking about accepting more than one business loan? This practice, known as “loan stacking,” may seem like a simple way to get business funding when a single lender doesn’t provide all the cash you need. However, it’s usually a terrible idea that can harm your business for years and may even cause irreparable damage. It is also crucial to consider whether loan stacking is a crime, as this could add legal risks to the financial ones. On this page, we’ll cover the risks when you take out multiple loans and alternatives to loan stacking so that it’s easier to make the right decision for your business’s long-term health.

    What is Loan Stacking and How Does it Happen?

    Only about half of all small businesses that apply for funding receive the full amount, according to the latest Small Business Credit Survey. Obtaining business financing becomes even more challenging when the economy is uncertain or during a lender retreat.

    At the same time, it’s quite common for businesses to apply for loans through marketplaces or request funding from many lenders at a time, hoping to increase the odds of being fully funded. This often results in offers from different lenders. When a business accepts more than one loan offer, it’s called “loan stacking.”

    The business wouldn’t likely qualify for both loans if they were requested independently at separate times. However, because the credit check is performed before either of the loans are accepted, neither loans shows up on a report.

    It makes sense that borrowers are often tempted to accept more than one loan, given how difficult it is to get approved for small business funding. Even still, the risks of loan stacking typically outweigh the benefits, though borrowers may not be aware of the consequences right away.

    Risks of Loan Stacking: Why Multiple Business Loans May Lead to Trouble

    If you’re considering applying for multiple loans at the same time, it’s critical to understand the risks of loan stacking and how it can negatively impact both your initial loan agreement and future financing opportunities.

    Many people start by asking, “Is loan stacking fraud?” or “Is loan stacking a crime?” Generally speaking, loan stacking is not a crime. It is considered fraud if you lie to either lender about the other. However, loan stacking, as the practice is described here, does not involve deception and is therefore not illegal. Even still, it’s one of the worst things you can do for your business for the reasons outlined below.

    Multiple Loans Increase Your Risk of Default

    The strain of debt is already being seen across the country, with nearly one-third of small businesses reporting that it’s challenging to keep up with debt payments, per the Small Business Credit Survey. Two in five owe more than $100,000.

    Lenders understand this, which is why they consider how much debt your business already has and your ability to make payments toward a loan before you’re approved. These steps reduce the default risk, protecting both you and the lender.

    When you stack loans, you’re increasing your payments and your debt ratio, which increases the likelihood of default.

    Loan Stacking May Violate Your Original Loan Agreement

    Lenders often include loan stacking clauses or have guidelines related to collateral. For instance, if you obtain an asset-based loan and leverage real estate as collateral, the lender has the lawful right to liquidate the property if you default on the loan. Most lenders include language in their contracts that indicates they receive payment first if the asset is liquidated. If you have two lenders offering funds based on the same asset, the combined loans likely exceed the asset’s value, meaning one of them isn’t likely to be repaid if you default.

    This situation makes lenders uneasy for obvious reasons, so one or both may consider this a breach of contract and demand full repayment immediately.

    Your Credit Score Will Take a Hit

    Your business credit score is comprised of several factors, including your payment habits, credit utilization, outstanding balances, and ongoing trends. Because loan stacking is most often done by businesses that don’t have strong credit to begin with, your credit utilization and outstanding balances will likely decrease your score dramatically. You’ll also have two new loans rather than one, which can make you seem riskier to lenders. Plus, it’s unlikely you’ll be able to keep up with monthly payments under these conditions, which decreases your score even more.

    As your credit score drops, your future loan prospects do as well. A bad credit score also impacts your trade credit access, interest and cost to borrow, insurance premiums, and rent. In other words, your business will become less profitable, making it even more difficult to manage cash flow. A damaged credit score not only limits access to loans in the future but also makes it harder to secure any loan or line of credit on favorable terms.

    Additional Loans Will Have Higher Interest Rates

    If you don’t receive full funding from a single lender, chances are that you’re considered a subprime borrower. This may mean you have a low credit score or lenders feel you’ll have difficulty maintaining your repayment schedule for other reasons. Businesses that fit into this category pay considerably more to borrow.

    For instance, those with good credit are usually offered business loans with interest rates that top out at around 20 percent. A well-qualified business may even see interest rates of around seven percent. Conversely, businesses with bad credit can see interest rates around 35 percent or higher. You’re also likely to see higher fees tacked onto your loans.

    Let’s explore what a typical loan might look like and what happens when you stack loans. In both examples, your business receives $50,000 with five-year terms.

    Traditional Business Loan Example        

    • Loan Amount: $50,000
    • Interest Rate: 10% (15.9% APR)
    • Loan Term: 5 years
    • Origination Fee: 5%
    • Documentation Fee: $750
    • Monthly Payment: $1,062.35
    • Total Payback: $63,741.13
    • Cost to Borrow: $16,991.13

    Stacking Business Loans Example

    Loan 1
    • Loan Amount: $30,000
    • Interest Rate: 25% (28.98% APR)
    • Loan Term: 5 years
    • Origination Fee: 5%
    • Documentation Fee: $750
    • Monthly Payment: $880.54
    • Total Payback: $52,832.38
    • Cost to Borrow: $25,082.38
    Loan 2
    • Loan Amount: $20,000
    • Interest Rate: 27% (31.79% APR)
    • Loan Term: 5 years
    • Origination Fee: 5%
    • Documentation Fee: $750
    • Monthly Payment: $610.71
    • Total Payback: $36,642.39
    • Cost to Borrow: $18,392.39
    Loans 1 and 2 Combined
    • Loan Amount: $50,000
    • Monthly Payment: $1,491.25
    • Total Payback: $89,474.39
    • Cost to Borrow: $39,474.39

    Traditional Loan vs. Stacked Loans

    Even though the loan amount doesn’t change, the business with stacked loans pays $428.90 more each month because they’re paying additional interest and fees. Over the five-year term, the cost to borrow is $22,483.26 more for the business with stacked loans too.

    You Can Get Trapped in a Negative Cycle of Debt

    As you can see, stacking loans can become very expensive, which is unfortunate because the businesses that stack loans tend to be the most cash-strapped. To keep up with payments, they often seek out additional forms of funding.

    At this point, however, the business is a high-risk borrower. That means it doesn’t qualify for most traditional loans, and the fees and interest are even higher if it does. Many are pushed into costly loan alternatives, like merchant cash advances (MCAs), with APRs that climb to 100 percent or more.

    When faced with these extremes, it is tough to dig yourself out of debt. Sadly, many small businesses don’t and end up closing.

    Alternatives to Loan Stacking for Small Business Owners

    While loan stacking isn’t illegal,  it’s seldom advantageous for your business, often resulting in more harm than benefit. When you’re in a situation where you feel the need to stack loans, it’s crucial to remember that this approach can complicate your existing loan obligations and make it more challenging to manage your finances. Stacking loans means taking out another loan on top of an existing one, which can lead to a tangled web of debt that’s difficult to navigate. Before you consider loan stacking, think about the impact it will have on your ability to pay back your current loans. Often, businesses that stack loans find themselves in a precarious financial situation, struggling to keep up with multiple repayments. If you’re considering loan stacking because you need more money, it’s worth exploring other options. There are alternatives to taking out another loan that might be more beneficial in the long term. It’s important to carefully review your loan contract and understand the implications of adding more debt to your portfolio. Remember, while loan stacking is not illegal, it’s generally bad for your business’s financial health and should be approached with caution.

    Ask Your Current Lender for Help

    Have a frank conversation with your current lender about how much you need and how you intend to leverage the cash. They may have alternate programs or be able to increase your loan amount. Explain the context in which you’ll be using the cash, highlighting your ability to repay the loan, which is a key consideration for lenders. Discussing your financial stability and repayment plans can build trust and might lead them to consider alternate programs that could benefit you. Additionally, if your needs extend beyond the current loan amount, don’t hesitate to discuss the possibility of additional funding. By clearly saying what you need and demonstrating a solid repayment plan, you increase the chances of your lender being receptive to increasing your loan amount or offering alternative financing solutions.

    Explore Refinancing Options

    Refinancing or consolidating your loans into a single loan with a lower interest rate and payment may be a viable solution for businesses that still have good credit and those that have paid down at least some of their debt. Particularly for businesses that maintain good credit standing and have successfully paid down a portion of their existing debt, this approach offers a viable solution. It involves the applicant applying for a new line of credit, which consolidates multiple debts into one, potentially with more favorable repayment terms. This not only simplifies the debt management process but also may provide an opportunity to break free from the burdensome debt cycle. By securing a single loan with a lower interest rate, businesses can align their debt obligations more closely with their ongoing business needs, leading to better financial health and stability.

    Avoid Loan Stacking with Invoice Factoring

    Invoice factoring is a unique funding solution that accelerates payment on your B2B receivables. Instead of applying for a loan, you’ll sell your unpaid invoices to a third party, known as a factor or factoring company. The factoring company then sends you most of the invoice’s value right away. When your client pays, the factor sends you the remaining sum minus a small fee, usually between one and five percent of the invoice’s value.

    Factoring can help you bridge cash flow gaps, so you don’t need to take out loans from lenders. Plus, you have no debt to repay, so it doesn’t have the same negative consequences as loans. It’s particularly beneficial in specialized industries, where steady cash flow is critical for managing operational expenses like payroll and vendor payments. For instance, factoring for security companies can cover recruiting, training, and labor costs even though the client may not pay for months. Similarly, invoice factoring for oil and gas service companies offers a flexible way to maintain steady cash flow. Plus, you have no debt to repay, so it doesn’t have the same negative consequences as loans.

    Request a Complimentary Factoring Rate Quote from Charter Capital

    With decades of experience helping businesses like yours and competitive rates that keep more money in your pocket, Charter Capital can help your business cover expenses and grow without accruing debt. To learn more or get started, request a complimentary factoring rate quote.