For many businesses, cash flow can be a major issue. This is especially true if you invoice customers and get paid weeks after services are rendered or goods are shipped. You still have to pay for supplies and labor, but your valuable cash flow is tied up in your invoices. One effective way to solve the cash flow crunch is with invoice factoring. In fact, many companies that often invoice other businesses have found invoice factoring to be an effective financial solution for their business. Here are the basics and a few reasons your business may want to consider invoice factoring:
What Is Invoice Factoring?
With invoice factoring, you don’t have to wait months for your invoices to get paid. Instead, your invoices are paid in 24 hours or same day. Invoice factoring puts money into your account faster, helping you better manage those times when money is tight. Imagine what you can do with more upfront cash in your bank account!
Invoice factoring works like this:
- You sell your invoices to a factoring provider like us!
- We then advance you up to 95% of the invoice amount in 24 hours or same day
- Next we collect the full invoice amount from your customer
- Once the customer pays us, you get the remaining balance (minus a small factoring fee)
Now that we’ve covered the basics, here are 5 reasons why many small-to-medium business owners consider invoice factoring as part of their financing strategy:
1. Unexpected Expenses
Just about every business faces times when unexpected costs rear their head and there isn’t enough cash on hand to manage them. Invoice factoring allows your business to cover those unexpected costs as they arise.
2. Outsourced Back Office
Many small businesses struggle to keep up with all their back office duties, such as billing and collecting from their customers. With invoice factoring, (we) as your factoring partner acts as an extension of your billing department so you can focus on other things, like growing your business.
3. Easy Approval
Getting a business loan from a bank can be challenging for many business owners. With a long, strenuous application process and strict approval guidelines, funding isn’t even guaranteed in the end. With invoice factoring, you’d just have to fill out a simple application and provide a few documents. Approval usually takes just a few days. How simple is that?
4. A Non-Existent or Understaffed Accounts Payable Department
Invoice factoring can help if you struggle to keep up with the volume of invoices or if your accounting department isn’t effective at making sure payment is received in a timely manner. It can provide you with the cash you need to survive and relieve the headache of chasing down payments. It’s your money – you’re just getting it faster.
5. Free Credit Checking
Unlike traditional funding from banks and lending institutions, factoring providers often have large customer databases and free credit checks so you can look up your customer before committing to the work. All it takes are a few clicks and couple seconds to get unlimited credit checks on your customers.
For more information on ways to cut costs and capitalize on available resources, please check out this blog post, When Money Is Tight Consider Freight Factoring. Originally written for those in the freight business, this article has some great tips for stretching your business dollars, regardless the services or products you provide.
Contact us about invoice factoring that may fit your business’s specific needs. After a quick and simple process, you could be approved in hours and receive funding within days. Take a few minutes to receive a free quote by calling 760.456.3786 or filling out the form above.
Guest Writer: Kerri Ewing of eCapital