I want you to imagine for a moment that everything is going exactly the way you had hoped in your business.
Your order book is full. Your cash flow is healthy. Your customers are happy. Even your employees are happy.
Then, a prospect approaches you. He’s impressed with your innovation He has seen the quality of your work. He likes the fact that you always deliver on time. And now he wants to give you a contract that is too big for your current operation.
What do you do?
Your first thought might be to approach a competitor and join forces.
But, let’s add a wrinkle to that scenario.
Suppose that the contract is so sensitive that your prospective customer is willing to give it to only one company? In other words, you won’t get it all if you need to recruit another firm to help you out?
These examples are just two of many of the kinds of opportunities that may come your way.
Entrepreneurs from Eastern Europe, Ukraine, and south-east Asia have come to the West, not only to learn about business, but also to do it.
And as you know, the state of the economy in recent years has made it harder for companies to turn away business, even if it really isn’t what they are tooled up for or prefer to do.
So that means that firms need to have the flexibility to draw on additional funds so that they can take advantage of the opportunities as they arise.
That’s easier said than done, because traditional funding options normally aren’t accessible as quickly as they need to be in such situations.
Families tend to be strapped for cash. Banks have forgotten how to loan money to business, especially SMEs. Business angels or venture capital companies might be interested, but usually there needs to be an established relationship in place in order to raise money in a hurry.
And even when such an association exists, if they’ve already invested in you, it’s unlikely that they will be willing to advance another tranche to you, no matter how great the potential, because it will increase their exposure.
And so it’s really down to you.
To be sure, the best companies maintain a contingency fund. Five to ten percent of your annual costs is probably a reasonable sum to have in your reserves. But, that money is there to cover unforeseen expenses; not to use for an untested or unexpected opportunity.
And since you already know that no business deal is immune from contingencies in any case, why would you risk everything on one opportunity?
The sensible thing, of course, is to raise the cash you need in another way.
And that’s where factoring can come into its own. Instead of using it as a stop-gap to forestall unpleasant consequences, you could use the same service to enable you to capitalize on new business opportunities. And once you’ve taken advantage of one, you’ll be encouraged to compete for the others.