There are dozens of reasons why invoice factoring can help a business succeed. Any business that needs working capital to keep operations running smoothly can benefit from invoice factoring. There are certainly reasons to apply for a bank loan in order to obtain the funds needed to pay bills, purchase supplies or inventory, or make payroll. But a bank loan can be restrictive. Additionally, a bank loan must be repaid within a certain time period – with interest. Accounts receivable factoring is not the same as a bank loan, and does not require you to take on debt. What are some of the primary reasons that invoice factoring can help a business succeed? Read on for our list of the most common reasons a business opts for receivables factoring instead of another method for raising working capital and increasing cash flow.
Being short on cash during certain times of the year is not uncommon. If you own a business that typically experiences a cash flow shortage during certain times of the year, you are absolutely not alone. No matter if your slow time of year is predictable or if you sometimes experience slow periods at unexpected times, invoice factoring can help get you through it. Most invoice factoring companies are flexible and are willing to step in and assist a business when needed. And one of the best aspects of accounts receivable factoring is that cash can be raised almost immediately, which can help any business succeed and thrive – even when it’s a slow time of year.
The money generated from invoice factoring is available much faster than it would be available with a traditional business loan from a bank. When a business applies for a bank loan, the process can be long and tedious. When a business needs cash fast, a bank loan may not be quick enough. If a business does not have the cash available to meet payroll demands, to pay rent, or to purchase much-needed supplies, the situation can lead to a recipe for disaster. Invoice factoring solves all of these problems. When a business decides to use an invoice factoring company, an account must be established. This can be completed in a matter of days (not weeks or months). Once invoices are approved for factoring, the factoring company provides the funds to your business quickly. In essence, accounts receivable factoring can be a life-saver for a business that needs cash fast in order to meet certain financial demands.
With accounts receivable factoring, you can forget about taking on debt that you don’t know how you will ever pay off. It’s easy for any business to get into trouble with mounting debt. The last thing a cash-strapped business needs is a large bank loan that requires large payments on a regular basis. And, what happens when the bank loan is not enough to meet your financial requirements? Does it make sense to take out another loan? Any business that is surviving on money generated from loans could be in for trouble. With invoice factoring, there is no debt. There are no loans. The money received from invoice factoring belongs to you, and your business never has to repay it.
If you decide that your business no longer needs or wants to use invoice factoring as a method for raising cash, you can stop at any time. When you sign a contract with an invoice factoring company, make sure to understand the terms of your agreement. If you want to have the freedom to stop your accounts receivable factoring at any time, make sure to select an invoice factoring company that offers flexible terms. But, keep in mind that invoice factoring is often used by businesses year-round – even when they are not struggling financially.
When you opt for accounts receivable factoring, you don’t have to stay up at night worrying and wondering when your customers will pay their outstanding invoices. It can be incredibly stressful to wait for invoices to be paid – especially when you know you can’t pay your own bills or payroll until you receive the money. When you use an invoice factoring company, you know that you will receive immediate cash on a certain day. Knowing when money will be available in your operating account can be a huge stress relief.
Invoice factoring is an excellent tool that has helped businesses succeed over the course of many years. It’s an excellent alternative to a bank loan because it is quick and it does not require your business to take on debt. Invoice factoring can solve your cash flow problems – and it can help your business reach high levels of success!
Editor’s Note: Greg Curtiss is President of The Invoice Bankers. Mr. Curtiss previously was a lawyer and has passed the CPA exam. He has been in business for over 25 years. You can reach him by calling 303-740-7600 or 1-888-740-1750.