Business owners have so many things to deal with on a daily basis, including ensuring their business is lucrative and thriving. A strong cash flow is a huge contributor to business success, and invoice factoring can be a great way to access the working capital needed to grow a business.
Invoice factoring is a financial transaction where a business sells a third party, called a factor, their accounts receivable, or invoices. The factor pays the business a large portion of the invoice, usually within 24 hours. The factor then collects the invoice amount from the business’s customer, and once the customer pays, the factor then sends you the remaining balance of the invoice, minus a small factoring fee.
Factoring can be a great way to grow your business and access the working capital you need to thrive. Below, we list the top 8 ways invoice factoring can help your business succeed:
1. Access quick cash needed to cover immediate business expenses to keep you operating smoothly. Most factors pay you within 24 hours. You can use the cash to cover immediate business expenses or help fund a job that you otherwise would have had to turn down.
2. Get added back office support. Factoring companies provide complete A/R management services, allowing you to save time and money. You don’t have to hire additional personnel or handle it all yourself!
3. Don’t incur additional debt. Factoring is not a loan, so you don’t have to worry about adding debt to your business.
4. Improve your company’s credit rating. Since factoring gives you immediate, steady cash flow, you’re able to pay vendors when bills are due, which will improve, or establish, your company’s credit situation.
5. Get a factoring program tailored to your business’ cash flow needs. This allows you to factor only the slow-paying customers, giving you control over your company’s cash flow. If some customers always pay on time, there’s no need to factor them!
6. Use factoring cash to fund your next job, and take on more business. You won’t have to turn down a job because you don’t have the upfront cash to fund it, allowing you to take on more business and grow your company.
7. Make payments on time and avoid late fees and interest charges. The upfront cash allows you to pay your bills on time, helping you to avoid costly fees and potentially saving your business hundreds.
8. Utilize the vital industry knowledge factoring companies provide to help your business grow. Many factoring companies are well versed in your industry and can often offer tips, advice, and additional savings programs.
Want to learn more ways factoring can help your business succeed? Contact one of our expert factoring consultants.