Financing Your Accounts To Open a Second Location

Opening another location for your business can be quite expensive, and not only because of the investment in equipment and personnel involved. Utility payments, supplies, and inventory all add expense, and you also need to maintain cash reserves that account for these increased costs when applying for most forms of financing. Often, it’s not that a business is unable to cover those costs of expansion that holds back the decision to open another location, it’s the issue of managing cash flow, and accounts receivable financing can help with that.

Predictable Income Pays Off

If you have the volume of business needed to support a second location but you’re worried about the timing of invoice payments because you regularly dip into cash reserves between payments, the key is not a higher income, it’s evening out the timing of your payments. Since you can’t always control when a customer will pay without changing to a cash-only business model, businesses looking to normalize incoming payments use tools like factoring or financing receivables. Of the two, accounts receivable financing tends to be less expensive when you don’t need to fully move on from the invoices.

Strategies for Financing Invoices

The key to financing receivables is remembering that your fees are dependent on a few factors. The most important are your customers’ payment histories and payment timing, but the age of the invoices and the number of different customers covered in the group also play a role. Most financing companies require you to finance all outstanding invoices at once, so the key to always having fresh invoices is financing them on a regular schedule. This gives you predictable paydays. When customers pay on time or near to it, the fees should be low enough to leave left over income after deducting the advance and financing costs, so you can also count on a back end payment.

By structuring your financing to account for outgoing expenses, it’s easier to make sure you can absorb the additional costs of a second location even before it is open. That makes it easier to plot out marketing in a new area without feeling rushed to make your business an instant hit. Instead, the established location’s income is able to cover your expenses while you bring the new crew up to speed, and you do it without taking on expensive loans. The best part? Accounts receivable financing outsources your collection process, which saves you labor hours, reducing your administrative overhead just when the new location is adding to it. That’s a powerful combination of benefits from a single form of financing.