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How to
Handle Cash Flow Problems in Your Foreclosure Cleanup Business
By Cassandra
Black
One of the biggest hurdles for new businesses is maintaining
adequate cash flow to keep the business alive while you're waiting on the
checks to start rolling in. You've already completed the work, now you're
waiting 30, 60, 90 days to just get paid.
There are solutions out there to help you handle cash flow problems.
One such solution is factoring, working with factors. What is
Factoring? Factoring is when a business sells its invoices at a
discount. For example, your foreclosure cleanup business just finished a
job for ABC Bank and you have submitted them with the $5,000 invoice.
Their accounting process for payment takes 30-60 days for your foreclosure
cleanup business to get paid. But you need your money, now!, so you can
pay your workers, reimburse yourself for all the money you've spent
replacing broken windows, etc. A "factoring company" (factor) will step in
and say they will pay your foreclosure cleanup business the $5,000, minus
the 15% fee ($750) they charge, and the factoring company will wait the
30-60 days to get paid from the bank. The factor allows your foreclosure
cleanup business to have your money for the invoice (which you will have
sold to them for the 15%) within 24-48 hours. The factoring company's fee
may seem high, but that's how they make their money. They are not basing
their decision to factor your foreclosure cleanup business on your credit
or your business' credit. Instead, they are basing it on the credit of the
bank that owes your foreclosure cleanup business the $5,000. Read this
portion over again so you get it. You may have "lost" 15%, but you will
have "gained" that all important cash flow. And, the name of the game in
the foreclosure cleanup business is cash flow if you are to stay open so
you can ultimately grow. If you have liquid cash and you can float your
foreclosure cleaning business using your own stash as cash flow, super!
But, if not, factoring is not a bad option. It can be expensive, but it
may be necessary to stay open and to ultimately grow. WARNING: Some
factoring companies may demand that your foreclosure cleaning business
factor all of its invoices with them (not just the big invoices, but the
little $175 jobs, too). Consider not going with those particular companies
in your foreclosure cleaning business. You want to be able to factor the
invoices you want and need to factor, not all of them just because you
have a relationship with that factoring company. Also, some factors may
try to lock your foreclosure cleaning business into a contract for a
certain period of time. Consider not locking yourself in. Your
relationship should be based on an invoice-by-invoice basis, no matter the
norm in the industry. Everything's negotiable, and it's your money, so ask
for the moon initially. Pros of Working with a Factor
The main benefit of working with a factor is your foreclosure cleaning
business gets it your money fast; you have adequate cash flow to pay your
workers, compete for other jobs, and keep growing. Cons of Working with
a Factor
The primary negative in using a factoring company is it can be
expensive. The fees are generally very high. Bottomline? Look at your
foreclosure cleanup business, your scenario, your cash flow situation, and
decide what works for you. There is no right or wrong answer when it comes
to factoring.
Cassandra Black is the author of How To Start a
Foreclosure Cleanup Business, and the Owner of
Foreclosure
Cleanup, LLC, and Real Estate Cleanup, Atlanta, GA
Article Source:
http://EzineArticles.com/?expert=Cassandra_Black
http://EzineArticles.com/?How-to-Handle-Cash-Flow-Problems-in-Your-Foreclosure-Cleanup-Business&id=2400543
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