When it comes to being in business, cash flow is a must to stay alive. While your customers may not pay you every month, it’s likely you still need to pay your suppliers every month. This is when the many benefits of using invoice factoring as part of your financial strategy can come in handy.
The first major benefit of using factoring financial services is that you can get access to cash quickly. Unexpected bills happen, and you need a way to pay for them. Whether it’s the broiler in the basement or the fuel pump went out on one of your vehicles, you need to pay to have them fixed. Invoice factoring allows you to utilize your unpaid invoices to get cash flow to pay for these unexpected expenses. Most factoring companies can get you cash within a day or two from submitting your invoices to them. This makes it simple to get that cash when you need it fast.
The next benefit of invoice factoring is the ability to avoid late payments and bad debt. It’s not uncommon for business startups to have issues collecting payments from their customers. This can lead to the business not having enough capital on-hand to pay their regular bills. This can lead to late payments and a bad credit rating for the new business. Invoice factoring provides an outlet to get money for those open invoices, so you can pay your own bills. It’s also a better alternative than seeking out quick funding loans that have high associated costs. With invoice factoring, you know what you’re paying upfront and there are no backend fees you need to worry about.
Invoice factoring can be done with many different terms. While traditional loans require specific periods and rates, invoice factoring is much different. You can get as much money as you have outstanding for your accounts receivable. You can submit some or all of your invoices. You can opt for getting all the money up front minus the factoring fee. Or, you can opt for getting some of the money up front and holding off for the rest of it once it’s paid as you’ll be charged a lesser fee from the factoring company. The flexible terms of invoice factoring make it super simple for any business to use.
The last major benefit that we’re going to talk about is funding for new businesses. It’s no secret that banks and other lending institutions don’t want to lend to new businesses. They’ve seen the statistics of new businesses going under after the first few years and know that it’s a very rare instance where a business thrives after two years. Invoice factoring seems to be the only alternative as opposed to high rate credit cards that new startup businesses can take advantage of to keep cash flow on hand.
Invoice factoring is a fairly new type of business financing option that is being offered. As a business owner, you should take some time to learn about this creative financing tactic and the many benefits that it can offer your business. It never hurts to have an arsenal of strategies ready to deploy when you need more cash flow for a given month.