Factoring Programs Can Help Small Businesses Pay 2011 Taxes

According to the IRS, over 50% of businesses in the United States face some kind of fine for late or incorrect payroll tax filings. Small businesses that are unable to pay these fines face astronomical interest rate charges. Aside from charging exorbitant interest rates, the IRS has a number of additional avenues to pursue which could include seizing company assets, or putting a lien on those assets. Even with companies moving away from manual payroll processes, there are still mistakes being made and these mistakes are becoming more and more costly for small business owner. In order to avert these fines, small businesses must remain up-to-date on the most recent government rules and 2011 tax laws. Unfortunately, many small businesses lack the manpower needed to keep abreast of recent changes in federal regulations. So, what can small businesses do to avert such costly IRS fines?

One of the more impactful forms of business financing in today’s economy is invoice factoring. Factoring programs allows small businesses to secure working capital through their existing assets. These assets are essentially the company’s receivables. Factoring companies allow small businesses to use the liquidity within these assets as collateral. As such, they provide small businesses with what amounts to an advance on the value of their customers’ unpaid invoices, allowing the small business to secure the financing they need to meet their debt obligations. Factoring companies can help small businesses with their 2011 taxes by sending advances on these invoices directly to the IRS. Or, if the small business prefers, the money can be provided to them directly. In essence, factoring plays a vital role in allowing small businesses to avoid costly penalties from the IRS.

Not only does invoice factoring help alleviate issues pertaining to tax bills, it also helps small businesses in terms of cash flow management and ultimately allows them to avoid having to finance their customers’ business. Because of the recent financial crisis, more and more companies are taking longer to pay invoices. The effects are felt throughout the economy as late payments force banks to raise interest rates. Higher cost of capital kills small business owners and having customers take too long to pay invoices does nothing other than to exacerbate the problem. However, invoice factoring provides small businesses with the capital they need to finance their operations. They can use this money to pay any late or incorrect tax filings, or can use the money to finance their day to day operations.