Advantages of Invoice Factoring

New startup companies quickly realize that purchasers often do not pay invoices on time which in turn creates cash flow issues for the company. Late payment from buyers means the company will now default on its own payment of bills, pay rolls and to its suppliers. While many like to opt for bank loans to mitigate the effects of late payments by customers, you should know that you have a far easier solution available.

Simply Sell Your Invoices!

That’s right, “factoring companies” are businesses which are built around the idea of helping other businesses tackle payments due on their invoices to their customers. A factoring company will simply purchase your invoices from you at a discounted rate, typically 80% to 95% of their original value and then collect payments your customers.

Typically a factoring company after it has purchased your invoices will pay you the very next day so you will have cash readily available for you to pursue your goals of building your company. This of course has a multitude of advantages to offer.

  1. 1.       No need for bank loans: Most businesses due to myopia tend to stick to bank loans for financing their companies; asset based funding such as invoice factoring can fuel your growth simply by the demand for your product/service.
  2. 2.       Have Cash In Hand Immediately: Get cash quickly from your receivables; no waiting at all. Such a method can greatly aid you in building your company, hiring more staff and creating more products or improving your services.
  3. 3.       Collection Assistance: Let a third party see to the issues of tackling your customers while you focus on your company’s day to day management. A factoring company can handle your accounts receivable perpetually meaning you will have less to worry about even in the long run.
  4. 4.       Build A Healthy Credit: With an account receivable financing system such as invoice factoring on your side you can pay your bills in a timely fashion thereby maintaining a good credit score. This in turn will allow you to get better terms with your suppliers.
  5. 5.       Pay Your Bills and Staff on Time: When you get paid on time, your staff and suppliers get paid on time. Clear out your bills, and pay out your staff when expected and maintain a good healthy working atmosphere in your office.

Invoice factoring can help you in building a better business model for your company. While before, an accounts receivable type of system such as this was considered as an end game solution where a company went when it was in dire straits, today, smart businessmen and women are opting for it in order to mitigate lost time and business opportunities. By letting a factoring company tackle your accounts receivables you are effectively freeing yourself from the need to spend time calling customers while also maintaining a healthy cash flow in to your business.

Many businesses are also opting for invoice factoring as they consider it to be a more favorable way of raising working capital as compare to bank drafts. The system is a more efficient method of managing finances and gives businessmen a lot more flexibility so consider opting for it.