An adequate cash flow is important for any business to stay afloat. Business owners who need to inject more cash into their business will think of taking out a loan. However, those who don’t want a debt take advantage of invoice factoring. Factoring is selling invoices to a factoring company. The latter will pay off a big chunk of the total invoice and usually hold a reserve that will be paid once the invoices are paid. Below are the main benefits of this business solution:
The majority of businesses can qualify for a factoring and get the funds they need in less than 24 hours. Invoice factoring is perfect for a business that cannot afford to wait to get their invoices paid which often takes 30-60 days. Also, factoring is ideal for a business which doesn’t have a long credit history and might have issues getting approved for a conventional financing.
Eliminates the Need to Owe Money
Taking out a conventional loan comes with costs and benefits that must be considered by business owners before they apply for it. However, although this provides them funds that they can use for their daily operations, it is money they need to pay back plus interest. Factoring, on the other hand, doesn’t work this way. It is selling invoices and getting paid in advance of the date specified in the invoices. This allows for the creation of cash flow without getting into debt.
Improves Credit Rating
If there is constant cash flow, a business can make payments without delay, pay their workers on time and cultivate a strong relationship with their vendors. In turn, this increases their credit rating. To make these possible, invoice factoring provides a business the funds they need to meet the demands of their operations.
Offers a Unique Financial Solution
Invoice factoring is a unique type of funding as the arrangement is based on the unique client list of the business and their needs. For instance, a number of factoring agreements might are likely to feature a one-time invoice factoring agreement. Others are designed for long-term agreements.
Helps with Business Expansions
An expansion is not always possible because of a lack of cash flow or funds that are required for purchasing equipment, buying property and hiring more people. Invoice factoring helps businesses get financing quickly so they can benefit from investment opportunities which require them to act immediately.