How to Use Debt Factoring and Survive the Recession
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by: PhillipEvans
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Word Count: 449
A record number of companies and shops went into administration over the Christmas period caused by the really awful trading conditions.
Stores and Companies to be effected by the economic downturn are Savvi the music retailer formerly Virgin Megastore, Adams the Independent childrens clothes retailer, USC the Fashion store and Whittard of Chelsea, the specialist tea and coffee retailer.
One of the most well know victims of the recession is Woolworths that went into administration just before Christmas. Its final shops closed on January the 5th, resulting in 27,000 staff loosing their jobs.
How can a business survive this recession? Well Alan Tilley of the Turnaround Management Association says that for a business to achieve a successful turnaround it needs four things; a viable business core, credible management team, a valid business plan and appropriate finance.
British Business is now facing a Cash Flow restriction caused by the credit crunch and and freeze in the capital markets forcing Companies to search out unconventional methods of finance
As an economy enters into recession one of the first thing a business should start consistently doing is keeping a tight rain upon costs. A firm hand upon expenses can save a business. Look at shipping costs, promotion and marketing, business location and even the simplest things such as turning off the office lights at the end of the working day.
Business owners interested in surviving a recession should look for alternative and appropriate sources of finance. The old clich of cash is king has never been more important than at the present time, although most businesses nowadays rely on some form of third party funding whether it be bank overdraft or business loans. Now may be the time to consider alternative sources of funding such as invoice factoring, which is increasingly popular for small to medium businesses. While not suitable for all businesses, the huge benefit of invoice factoring is that rather than have money tied up in invoices that are yet to be paid, you can receive an initial payment up front, typically 80% - 85% of the gross value, and the remainder when the customer pays the invoices to an invoice finance provider, less the service fee which has been negotiated with them. However, if the customer defaults on payment, then the factoring company will recover the money provided to you initially from any further invoices which are factored. This can lead to random cash flow if customers are slow payers or they go into insolvency.
About the Author
Invoice Factoring is provided by the Asset Based Lending team of Enable Finance Ltd. Enable Finance are professional small business finance brokers providing British business access to traditional and alternative sources of finance. For a free meeting please contact the Business Refinance Team.
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