Which costs you more as a business owner? Discounting invoices to your customer or putting your invoices up for sale via invoice factoring? Worse yet: What are the hazards of a bridge-loan?
What costs more? Offering a 1%-10 discount or giving up 3% to a factor for an invoice that is out 30 days?
If you truly understand the Time Value of money … they are the same – but then again they are not. Why? In the case of the 1%-10 discount your customer mails you the check on the tenth day, it has to get to you, and you have to deposit it. Elapsed time? 14 – 17 days. With the factor? You have the money in your account on day one so you have 80% (+) of your funds in hand two weeks earlier. Granted: It’s all based on what you need and when but you do need to know this.
Considering a bridge loan? Business Capitalization via borrowing puts you on top of the wave on day one and drowning under the burden of debt from then on. So why do it? It seems fast! It’s made to be easy … but it’s really made to sell you money that you most likely can’t afford to pay back so why do it?
All too often people come to me and they actually do not understand their cash flow demands. Neither do they understand fixed costs, break even points, and other details that spell the difference between making some money … or making a lot of it!
So what’s your approach: Knowing what you’re doing or following the rest of the crowd? Do it right and you’re golden .,. choose wrong and it can cost you – so give us a call or drop us an email: We’re here for you!