If you own a business – large or small – you need to know about the fast and convenient alternative to business financing or loans from a bank: factoring. Sometimes known as invoice factoring or accounts receivable factoring, this service involves giving any or all of your invoices to a factoring company who purchases your invoices at a small discount, so you receive immediate cash. Many times a factoring company will take on the credit risk of collecting on the invoice.
Whether your company is just starting out or you have been in business for a while, you can use factoring as an inexpensive financial tool to relieve cash flow pressure caused by slow paying customers. Instead of waiting weeks or months to be paid for your invoices on products you’ve already delivered or services you’ve already performed, you receive cash in as little as just a few days.
Some of the major benefits of factoring include:
– No upfront fees – This is not a loan, so there’s nothing to pay back, no monthly payments and no minimum term contracts. Once your cash flow has improved you can stop sending your invoices with no penalty whatsoever.
– Fast funding – Unlike a bank that requires a lengthy approval process, factoring services are simple and fast. There are minimal forms to fill out, and many companies will let you know if you qualify in just a few days or even in as little as 24 hours.
– Easy credit qualifications – In general, factoring companies don’t rely on personal credit scores, business history or lengthy application periods as with traditional funding. Instead they rely on the credit worthiness of your customer.
– Friendly, confidential consulting – Since the factoring company wants to maintain your trust, most companies will work much harder to ensure your account is always serviced promptly and properly. You can always feel free to ask any questions about the process or other services offered at the company.
– Purchase new equipment – With the money you receive from your invoices you can do a wide number of things. Unlike a bank loan, you do not have to specify exactly what you will be doing with the funds. One of the things you can do is purchase new updated equipment for your business. This can help you perform services faster or bring in more clientele, thereby increasing your overall ROI.
– Purchase inventory/seasonal merchandise – Many retail companies encounter difficulties buying seasonal merchandise in addition to the stock they already have on hand. With the fast cash you receive from your invoices you can purchase more of the big seasonal sellers in your industry and in turn sell more products.
– Expand your business ‘Use the cash you receive from your invoices to expand your business and bring in more customers.
– Pay off debt or taxes – It happens to nearly every business, large or small. Tax time sneaks up on you and you can’t cover your business taxes, or maybe you just have a lot of debt to pay off. Instead of waiting 30, 60 or 90 days for clients to pay their invoices, you can receive fast cash to pay off bills that are nearing their due date.