Signs Factoring Accounts Receivable Can Help Your Business

Can factoring accounts receivables help grow your business?

That’s a very good question. Most small businesses invariably need more money than what their owners have in reserve. They need to pay their staff, buy supplies, get tools and equipment, cover rent and utilities, and spend money on marketing and advertising.

If this situation applies to your own business, perhaps you’re thinking that a bank loan is in order, or you may even be contemplating using your own credit card to fund your business operations.

But you are not limited to these options. You can also consider factoring receivable. Here are some signs indicating that factoring may be an ideal solution for your needs:

  1. You don’t want to go into more debt. There are many reasons why you don’t want your business to incur any more debt than it already has. Perhaps you now owe a ton of money to the bank or to your friends and family. Adding more debt on top of those obligations may be more than what you can handle.

But with factoring, you don’t have to take out a loan at all. You get an advance of the money owed to you by your customers, and that’s a different thing altogether.

  1. You can’t get a loan. Maybe you already applied for a loan and your application got rejected. There are many possible reasons for this. Perhaps your company is new, and the bank is not convinced you’d be able to pay back their money. Or you have bad credit, which makes you a poor candidate for a loan.

For whatever reason, factoring may be a more viable alternative, since it’s much easier to get. Most factoring companies don’t really care about your credit.

  1. Your give credit terms to your customers. It can be very frustrating when you can’t have the money needed for your business expenditures, because your customers have not paid you in full. Perhaps your agreement with your customers allow them 30 to 60 days to pay for their purchases, in which case you’ll have to wait a long time before you get your money.

If you can’t wait, then factoring becomes a suitable solution. The point of factoring is to get you that money in advance, so that you don’t have to wait at all.

  1. Your customers have good credit and payment histories. This is the most important consideration for factors. If your customers have a very credit history then you’re likely to get your factoring application approved. Also, you may only have to pay a smaller fee than if your customers have spotty payment records.

If any of these apply to your business, then it’s probably time to consider factoring accounts receivables to get the working capital you need. You’re more likely to get financing, and you can use that money to help your business grow.

Published by

Chris Lanchech

Hi everyone, my name is Chris and I am a junior analyst at Neebo Capital and an inspiring blogger. We enjoy speaking with business owners and entrepreneurs who come to Neebo Capital looking for cash flow solutions.

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