Using Invoice Factoring to Better Your Business: A How-To Guide

All business owners know sometimes you need an influx of cash quickly. If you provide services to clients, there are situations where you need access to funds sooner than your clients are able to pay. When getting a traditional loan is not an option, a better alternative is factoring your invoices. This can give you the edge you need to stay competitive in today’s market.

The Waiting Game

When you factor your invoices, you are taking out a loan based upon your clientele. After work has been completed on a specific project or delivery of goods, you bill your client and patiently wait for payment. Problems arise when your business requires payment immediately. Instead, factor those invoices in exchange for a small fee for a transfer of funds right away, often directly into your bank account the same day. By looking at how reliable your clients are at paying your bills, the factor will offer direct payment on a portion of the invoice, and when remittance is later made, you will receive the rest minus a service fee.

Factoring In the Benefits

There are many benefits to take into consideration when you factor your invoices. First and foremost, your funds are accessible sooner than through other methods. This gives you cash on hand, allowing you to increase inventory, purchase machinery, and hire personnel, allowing your business to grow. In addition, many factoring agreements take on collection responsibilities directly. This allows your business the freedom to focus on other, more lucrative things such as generating income and finding more clients.

Lower Risk, Greater Reward

Lacking credit is often an issue that faces businesses, especially fledgeling companies. If you factor your invoices, this becomes much less of a concern since this type of lending is based on your clients. When you deliver goods to a prominent big box store with a well-established remittance history, there is little risk of missed payments. Therefore, the lender can offer you a much lower fee in exchange for immediate financing. Since it is considered an unsecured loan, you don’t need to provide collateral either, ensuring personal and business property is safe. This also provides an alternative to selling equity in your business, ensuring that your company stays where it belongs: in your hands.

It is difficult to generate the capital needed to grow any business. By choosing invoice factoring, you can have access to the funds you need to grow. Gain access to cash quickly and reliably, and let your company become the success you’ve always dreamed it would be.

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