Five advantages of invoice factoring:
Cash flow is the lifeblood of any business. However, small startup businesses normally find themselves in a dilemma when they are about to get in a business contract only to find out it will take over 2 months to get paid. You have probably found yourself in such a situation, facing up a lucrative customer who pays their vendors after 60 days. Thirty days later you have huge unpaid invoices, unpaid business bills, and salaries. Luckily today, there are multiple online and offline invoice factoring companies, where you can sell your unpaid invoices and get cash advance of up to 90 percent or even more. But you might be asking, how can invoice factoring really help my business? In relation, we have come up with five proven ways invoice factoring can grow your business.
1. Invoice Factoring Enables You to Take on New Opportunities
As a small business, you are always looking out for ways to grow. In that journey of growth, you may find a large scale customer who would take your enterprise to the next level. Most of these large scale customers, such as manufacturing companies will pay you after some period of time. Without invoice factoring, it would make any small business unstable as you have bills and employees to pay.
Invoice factoring eradicates all these worries and gives you the confidence to pounce on any big business opportunity. In other words, you will be able to adapt to big customers’ requirements and be able to run a sustainable business all through.
2. Factoring means More Working Capital and Cash Flow for Your Business
Selling your invoices to factoring companies translates to two things; more cash flow for your business and boosted working capital. Unlike waiting for months to get paid, you will have more money to buy more inventories, fill orders and grow your business. Lack of such flow has contributed to failure of over 80 percent of businesses in the USA alone, meaning your business success chance is higher with this route. Other than the flow itself, you will have more predictability of your finances. This in itself improves your borrowing capacity among many banks looking for consistency.
3. Factoring Translate to More Business Credit Control
Small businesses or startups are always weighed down by the burden of credit. They spend a significant amount of time and resources following up debtors. With invoice factoring, the factoring company takes away that burden so that you can concentrate on other critical areas of the business. That way, you can enter into a business contract with any customer knowing you won’t have to wait for months to get paid.
The factoring company does all the hard work for you. They check the customer credit worthiness, provide you with transaction particulars and follow up with the outstanding amounts. If you decided to handle all these on your own, it would take up a lot of resources but all these is included in the small fee paid to the factoring company.
4. Invoice Factoring Can Be the Foundation for Future Growth
By now all the invoices have been paid and you have more control of your credit. This means you can now focus on the future of your company or business. Invoice factoring does not only help you focus on the growth but also afford you sufficient funds to do so. You have more funds for key business pillars such as marketing, taking new clients and hiring new talents. It also means the employees can now focus their energy on the future growth.
5. A Better Alternative than Borrowing
Businesses that do not opt for invoice factoring end up with two options, rejecting huge clients or opting for a loan to service their business. While the latter is more attractive than the former, it comes with its own down side. Huge interest rates and rigid terms are not favorable for small entities. With invoice factoring, however, you will not meet strict requirements needed by banks and lenders. For instance, poor credit score businesses can easily qualify for invoice factoring services. As long as your clients meet the factoring company credit score requirements you are good to go.
Bank and other lenders will always put a restriction on how you can spend the money you borrowed. With invoice factoring, you can spend the money in any way you like. Your spending decisions are not limited by rigid terms and conditions seen in lenders. In that case, you have the complete authority to buy new inventory, hire new workers, or even use the funds for personal ventures.