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Can't Go With the Flow?

Simple solutions for winning the cash-flow battle

This story appears in the August 2001 issue of Entrepreneur. Subscribe »

Q: Weown a 5-year-old temporary placement service, and I'mconstantly fighting the cash-flow battle of collecting myreceivables long after I've paid my payables. Do you have anysuggestions?

A: Iwould suggest using a line of credit or factoring to keep up withpayroll and payables, using your receivables as collateral.Accounts receivable lenders normally advance 75 to 90 percent ofthe amount of money your clients owe you. You can also sell yourreceivables via factoring, in which the lender buys receivablesfrom you on a discounted basis of 50 to 90 percent of thereceivables' face value. Both methods can be expensive but willallow you to turn receivables into cash in days rather thanweeks.

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