Are you looking for a business loan? Or maybe you need a business line of credit, if not a business loan – bottom line is, you need to have more money now or risk defaulting on your payments. While the business loan or line of credit is indeed a popular option, this isn’t the most feasible option in the long run. And in reality, few business owners actually manage to get them.
There may be times when invoice factoring would be the solution to your problems, so you may want to consider this. But first, ask yourself these three questions before deciding on factoring over the conventional business loan option.
Are your clients’ slow payments hurting you? Meaning, does it take up to 60 days before they pay?
Are you suffering from a diminished number of sales prospects due to a paucity in working capital?
Would your company be able to thrive and succeed if you have enough finances in your coffers?
If the answer to questions one and two was “yes” and you believe your business can grow with enough capital, then invoice financing it is – you might as well take a flyer on this alternative option. Invoice financing is tailor-fit financing based on the invoices you submit, thus giving you enough money to tackle payroll, overhead and other expenses as you get the money almost immediately.
Unlike business loans, there are no use limits to factoring, as it is all predicated on the potential of your company to sell more units or attract more customers. You can qualify for more financing as your business grows in stature. Period. This is a product and a service in one that solves the problem of realizing a business’ special potential to thrive and make money.
There isn’t much to the process of factoring, which is sometimes known as accounts receivable factoring. Once you have invoiced your customers you send a copy of the invoice to the factoring company. The factoring company, in turn, advances you up to 90% of your invoice and waits to be paid by your client. They would settle the transaction and rebate the reserve money minus a fee once the invoice is paid.
In effect, by financing your invoices you eliminate the slow payment problem. With cash flowing in much faster, you can settle your payables, engage in new sales opportunities and watch your company grow.
Cost-wise, factoring is very inexpensive. The monthly fees for factoring usually fall between 1.5 to 3%, which is not much at all. If you own a business that is growing and you need financing, be sure to consider invoice factoring.
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