Business growth is often considered one of the clearest signs of success, but all too often, growing too fast can cause financial strain. It’s easy to grow yourself out of cash. The costs of expansion often precede the revenue gained by that expansion. This is true whether you are adding personnel, fulfilling larger orders, or onboarding new clients.
If you’re reading this, you’re probably an owner, CEO, or CFO who is already feeling this cash crunch, so we won’t belabor the point.
What Are Your Options?
Bank loans, revolving lines of credit, and equity capital each have a place—but each brings limitations, and likely you’ve already explored those options. A line of credit is often the most cost-effective option, but if your business is growing too fast, most lines of credit can’t keep up, and you end up having to term the loan out. Starting with a term loan requires collateral, and may be too slow or too rigid, especially for businesses with uneven or seasonal growth needs. Equity dilutes ownership and could divert your focus. So, if those options don’t work, are there other options?
Accounts Receivable Factoring to Support Growth
This is where accounts receivable factoring shines. If you’re unfamiliar, accounts receivable factoring (also referred to as invoice factoring, or just factoring) is a form of commercial financing whereby a business sells its accounts receivable at a discount to a factoring company in exchange for immediate cash. By converting accounts receivable into working capital, factoring enables businesses to fund current obligations, leveraging the revenue they’ve earned, but haven’t yet received. In short, factoring speeds up the cash conversion cycle by removing the time it takes receivables to pay. For a company growing too fast, factoring aligns delivery with collections.
At Flexent, we’ve worked with high-growth companies across numerous industries for over 30 years. We understand that growth, while welcome, often challenges a company’s infrastructure and finances. Our goal is to equip fast growing businesses with financing that is flexible and robust enough to meet their needs and fuel their trajectory.
If you’d like to learn more about the problems caused by a business growing too fast, the common limitations of traditional lending, or how factoring can support your business, read on. If you’ve read enough and would like to see if we might be a good fit for you, let us know!
What Happens When Growth Outpaces Capital
Rapid growth is a good sign, but often puts businesses to the test. The timing mismatch between when you incur costs and when you collect revenue is challenging. In most industries, expenses arrive early—raw materials, wages, production costs—while income lags, trapped in accounts receivable. The faster the business grows, the wider that gap becomes. As that gap continues to widen, a company that is profitable on paper may struggle to meet its daily obligations. Growth brings with it new fixed costs—more space, more people, more systems—not to mention the new complexities associated with scale, whether managerial, legal, or technological.
The Costs of Growing A Business with Low Liquidity
Without cash, a business can’t function. So, when liquidity dries up, your business becomes reactive. Focus shifts from forging new opportunities to payment timing. This could cause you to delay vendor payments, new hires, new projects you would otherwise have capacity for, or even payroll. The old adage “robbing Peter to pay Paul” becomes all too real.
Customers expect reliable delivery of goods and services. Employees expect consistent payroll. Vendors expect to be paid for their goods and services on time. When a business can’t meet those expectations, it risks credibility. On top of that, unrealized opportunities can become costly.
In short, growth is not a simple upward slope—it’s a stress test. And without a financial structure that can expand in lockstep with operations, the very momentum that signals success can become a point of vulnerability.
Limitations of Traditional Lending
As mentioned in the introduction, when a business is growing quickly and needs capital, traditional lending is often the first place they look. Bank loans and revolving lines of credit are familiar and relatively low-cost. For companies with stable performance and predictable cycles, these tools can work well.
But growth—especially growth that outpaces collections—exposes the limits of conventional credit. One of the first points of friction is eligibility. Most bank lending is collateral-based and considers historical performance. This approach, while prudent, assumes that the future will resemble the past. But for businesses growing quickly—doubling revenue in a year, entering new markets, onboarding larger clients—the past doesn’t anticipate the current need. This leads to many lines of credit being insufficient to cover operational needs.
Factoring, by contrast, operates on a present-tense logic. It advances money based on revenue that is earned but unpaid. It grows as the business grows, and does so without requiring traditional debt, equity dilution, or long-term entanglements. Factoring also is generally easier to qualify for, since the factor primarily considers the creditworthiness of your customers when underwriting the deal.
How Factoring Works for High-Growth Businesses
Factoring is a working capital tool. It provides liquidity from the value a business has already created—its invoices.
As covered above, factoring allows a business to convert accounts receivable into immediate cash. Rather than waiting 30, 60, or 90 days for payment, a company can receive 80-90% of that value upfront—often within 24 to 48 hours—by selling those invoices to a factoring partner. The factor then collects directly from the customer when payment comes due, and releases the rest of the 10-20% (minus a processing fee).
Learn more about the process of factoring here: What is Factoring?
What makes this approach especially suited to high-growth businesses is its alignment with scale. Unlike fixed credit lines or term loans, the amount of available capital in a factoring arrangement can be more dynamic. The collateral can increase as the business books more sales and issues more invoices. This means that funding capacity grows with sales volume.
Benefits of Factoring for Fast-Growing Companies
This alignment between product or service delivery and collections produces liquidity, stability, therefore, opportunity. If you could get paid the day you invoice, what could you do?
When invoices are converted to cash within days rather than months, your business can more easily fund payroll, purchase inventory, and meet vendor terms (even securing early payment discounts). Shifting from reactive cash management to proactive allocation then positions your business to take advantage of opportunities.
So, while factoring offers speed, flexibility, and doesn’t involve taking on traditional debt, the primary benefit is the ability to say “yes”, whether to a new contract, a time-sensitive hire, or an expansion opportunity that might otherwise be deferred. Liquidity unlocks momentum, enabling you to move decisively, without compromising stability.
How to Know If Factoring Is Right for You
Factoring is not a one-size solution. It is a tool, most useful in specific circumstances—particularly where growth is strong, receivables are steady, and traditional capital is either too slow or too limited to meet current needs.
If you’re considering ways to fund continued expansion without increasing debt or giving up ownership, answer a few of the questions below to see if factoring may be the right tool for you:
