Running a successful catering business can be challenging. Catering companies often require a constant and reliable source of working capital to cover the costs of food, setting, decorations, transportation, and payroll. The problem is that not all catering companies have the capital reserves to pay for events ahead of time, and the aging window on invoices can create a major strain on cash flow.

Catering Companies Are Avoiding Loans

Every business wants to avoid debt wherever possible, and taking out short-term loans to cover financial obligation or the cost of production can prevent catering companies from thriving and growing. The debt from short-term loans can quickly add up, and all it takes is a few large client requests to put a catering business in the red. Catering companies don’t want to turn down customers because they have to scale back operations due to a lack of funds, and loans are not the answer. Over the past few years, catering businesses have been finding a viable alternative to loans to cover overhead expenses and to grow operations.

Leveraging Invoices for Cash

For catering companies, a strain on cash flow is rarely caused by preparation expenses. Most financial issues come from unpaid client invoices. Issuing invoices with payment schedules of 30 days or longer is a standard business practice, and one which customers have come to expect. Unfortunately, the delays in revenue due to said schedules cause gaps in cash flow. Instead of taking on unnecessary debt through short-term loans, catering businesses are using factoring to turn unpaid invoices to cash. Factoring doesn’t change anything for clients, and they still have to remit payment according to the aging schedule. Catering businesses on the other hand, get cash for their open invoices within 24 hours. Factoring provides an improved cash flow, as well as the ability to accumulate capital for growth. Caterers will be able to cover overhead expenses, take on large client orders, launch advertising campaigns, and expand into new areas, without the debt or other restrictions from short-term loans.

FSW Funding provides working capital solutions to the service industry, including catering companies. If you want to correct or prevent cash flow issues, or if you want immediate access to revenue from unpaid invoices, contact our offices. Our team will work with your directly to crease a factoring solutions tailored to your needs.