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Leveraging Invoice Factoring in a High-Interest, Inflationary Environment

February 1, 2024

It is no secret that 2022 and 2023 presented unique challenges for business owners, and the theme of heightened interest rates and spiking inflation only added fuel to the fire.

As the cost of goods and services increases it becomes ever-important for business owners to offset increasing expenses to allow their businesses to continue to grow and thrive in times of economic uncertainty. The following article details how invoice factoring serves as a funding solution that provides an added sense of security as operational costs climb.

According to the Bureau of Labor Statistics, the 2022 Year-over-Year inflation rate was at a 30-year peak. Inflation is a normal part of an economic cycle, but particularly high or negative inflation rates can be detrimental for an economy. Over the past 10 years, the US had experienced lower-than-normal interest rates (at or around 2%), but due to pressures from the pandemic, global conflicts, and federal spending, we saw inflation climb to rates nearly 5x the 10-year average. To combat this spike, the Federal Reserve continuously increased interest rates from March 2022 to August 2023 in the hopes that increasing the cost of money itself would lessen demand and trickle down to impact inflation, reducing inflation back to normal levels.

Alleviate Inflationary Pressure With Invoice Factoring

So, what does all this mean for you and your business, what can you do to alleviate some of the pressures, and how does invoice factoring from Commercial Funding Inc. (CFI) play a role?

If you deal in business-to-business (B2B) transactions and issue invoices to business customers, factoring could be a great fit for your company. Invoice factoring takes place when a company sells its unpaid invoices (the receivables) to a third party like CFI. In return, CFI (the “factor”) provides the company with immediate cash, which is typically an agreed upon percentage of the invoice amount. Invoice factoring is a straightforward, cost-effective way to ensure you get paid faster for your invoices.

Unlike traditional bank loans you aren’t borrowing money so there is no impact upon your balance sheet. And unlike merchant cash advances (MCAs) invoice factoring doesn’t require you to make payments, have ACH funds taken out of your deposit account, or worry about extremely high interest rates. So, when traditional funding options become more expensive due to those elevated interest rates, invoice factoring provides an alternative source of liquidity without incurring additional debt. This can help you navigate the higher cost of borrowing and maintain healthy cash flow.

On top of mitigating the impacts of heightened interest rates, invoice factoring also proactively tackles the resultant impacts of inflation. Remember, that within an inflationary environment, the value of your accounts receivable lessens the longer they remain outstanding. If you’re commonly waiting 30, 60, or even 90+ days to get paid for your invoices, the expense of that waiting period becomes even more costly for you and your business. By converting receivables into immediate cash, businesses can circumvent the devaluing effects of inflation.

In an environment of uncertainty, having access to reliable cash flow becomes paramount. Inflationary periods often bring about shifts in market dynamics, creating new opportunities for expansion or strategic investments. With readily available working capital from invoice factoring, businesses can seize these opportunities without delay.

Commercial Funding Inc. excels in supporting businesses, especially during times of economic uncertainty when it is needed most. Take a look at some of our case studies that explain how invoice factoring helped businesses during a time of need:

If your business is feeling the effects of a high-interest, inflationary period, reach out. At CFI, we pride ourselves on offering flexible funding solutions that provide support for companies, especially when it’s needed most. Our goal is to help customers speed up their cash flow by getting them paid faster for their invoices. When you choose to factor with CFI, you spend less time worrying about when you will get paid and more time running and growing your business!

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Additional Resources

Optimizing Working Capital to Fight High Inflation and Rates – Treasury Management International

Managing Liquidity Before Inflation Heats Up – Deloitte

Inflation Affects More Than Just Small Business’ Bottom Line – Forbes

How Interest Rates Can Hurt or Help Businesses – Forbes

US Inflation Rate By Year: 1929 to 2023 – Investopedia

Federal Funds Rate History 1990 to 2023 – Forbes

Is Inflation High Compared To Years Past? Breaking Down Inflation Rates By Year – Forbes


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