What Can a Factoring Company do for You?
Are you looking to get factoring financing for your business? You will learn about the advantages of working with a factor. However, we will also present some of the issues and concerns of factoring, in the hopes that you can develop a balanced view and make an informed decision about this solution.
First and foremost, this type of financing is designed to solve only one very specific problem. It solves cash flow problems created by slow paying clients. If you have problems paying suppliers, employees, or taking on new clients because you can't offer terms to them, an invoice financing company should be able to help you.
Let's look at the problem
The problem is actually quite simple. Most large corporate and government clients demand payment terms, but few entrepreneurs and mid sized companies can afford to offer them. They either have their money tied elsewhere or simply did not plan their cash flows to account for this. They need quick customer payments in order to be able to operate.
This problem is fairly common and affects many companies - especially fast growing companies who need the money the most.
How factoring companies help you
A factoring company can help you by financing your open invoices from slow paying, but creditworthy customers. Instead of waiting up to 60 days to get your money, you get immediate funds from the factor. This provides you with the capital you need to cover your expenses and run your business. The transaction concludes when your client pays in full after 30 or 60 days. The following link has more details on how factoring works.
Advantages of using this solution
The main advantage of working with a factor is that you get stable and predictable cash flow. Your working capital is no longer hostage to slow paying clients. But while this is the main advantage of a factor, it is not the most important one. The biggest benefit your get from them is that you will be able to offer payment terms to clients with ease. You can use them as a tool to grow your company. Lack of working capital will no longer be a reason which caused you to walk away from a sale. This sample case study shows factoring financing used a sales growth tool.
Also, qualifying for this type of funding is relatively easy. You just need solid clients, invoices that are not encumbered by liens and a small track record in your industry. Most entrepreneurs and small companies can meet these criteria.
Disadvantages of using a factor
Like any financial solution, financing invoices is not perfect. The solution only works if your clients have good commercial credit. While you should always strive to work with these types of clients, the truth is that not everyone has great credit - or any credit. A factoring company can't help you if your clients have bad - or no - credit.
Also, factoring is not transparent and does require client cooperation. Here is additional information about the common issues with factoring along with some of the disadvantages of invoice factoring.
Factoring companies can provide an ideal solution for businesses that have working capital issues created by slow paying corporate clients. It's easy to obtain, can be deployed quickly and the line can grow easily alongside your sales. It's an ideal solution for companies that have exhausted their bank options and need funding to operate and grow.
Rates as low 1.5% for qualified clients. Advances as high as 85%
Get an instant factoring quote. Or call (866) 730 1922 USA & Canada
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