How Your Business Can Benefit From The Invoice Factoring Process
Starting a business is an exciting time for any entrepreneur. However, if you’re like most business owners money can be an issue during the early years, and at times later on as well. For certain industries a slow time between when services or goods are provided and when a client pays can lead to major issues, particularly in the manufacturing world. When a company needs materials to continue producing or cash flow to pay needed employees for day to day operations, a bank or traditional line of credit isn’t always an option, especially for those businesses that are just starting. For business-to-business companies, the invoice factoring process can provide some much needed cash flow without ever having to apply for a traditional business loan.
How exactly does invoice factoring actually work? Essentially, a business can sell invoices for immediate funds. The business selling receives a percentage of the invoice up front, and when the client pays, the company that purchased the invoices pays the remainder of the invoice amount, minus a fee for the factoring service. Rather than waiting weeks or even months for a client to pay up and being forced to halt operations for other clients in the meantime, invoice factoring services help to bridge the gap and ensure that your business can continue growing in the meantime.
Lines of credit and business loans can be incredible tools. However, newer companies often struggle with getting loans, and there sometimes the amount a company needs is simply too small. The invoice factoring process allows you to get the amount of money you need, meaning you won’t have to borrow more than you actually use to continue day to day operations. The most incredible aspect of invoice factoring is that there are no interest rates or recurring monthly payments to deal with. A business simply pays a fee for the service when the client pays the invoice in full.
Businesses can count on accounts receivables factoring without having to lose control of their finances. When a business owner obtains funds by selling invoices, he or she gets to decide what to do with the money. Whatever you need, whether it’s purchasing raw materials for manufacturing or paying your employees, the choice is up to you. Banks and other lending institutions have a great deal of requirements and qualifications for businesses to live up to in order to lend money. The invoice factoring process avoids all of these complications and allows business owners to have control of how much they get based on how many invoices they sell. Because there is no contract involved, a company can choose what invoices they decide to factor, how often they decide to factor, and what they do with the money after. This kind of flexibility is often what growing companies need in order to continue succeeding in the beginning stages of business.
One of the biggest obstacles for companies when they are first starting out is capital. In addition to that, it can take years to build up a strong financial history or the credit you need to obtain the funds required to grow your business. The invoice factoring process looks at your client’s ability to pay rather than yours, meaning that you don’t need a strong financial background to get funding for your company. With the ability to sell invoices for fast cash flow access, businesses can focus on offering great deals to customers and even extending credit terms without having to worry about whether or not your company will have enough money. Having available money when you need it helps to relieve a great deal of the stress that comes with starting a business and ensures that companies keep moving forward and building a consistent and strong client base.
Once you have worked with a factoring company the process between selling your accounts receivable and obtaining cash is very fast, within 24 to 48 hours for most companies. This offers businesses cash immediately, when they need it most, ensuring that not one day is lost in the effort to build an incredible business. Banks and credit lending institutions can take weeks and even months to make a decision to give you money, and you pay for it in interest rates in the long run. With the invoice factoring process you apply initially, provide necessary documentation, and wait for approximately a week to be set up. From that point forward, you can count on having cash within a couple of days, allowing you to use the capital you need the way you want. The fees are low, there is no debt involved, and the process in and of itself is simple. If you are a B2B company and need some help with cash flow issues, find out about how accounts receivable factoring can work for you.
