Some businesses refuse to turn to a factoring company because they believe that doing so means they could incur more debts. But this is very far from the truth. There are many reasons why factoring your accounts receivable can be beneficial for you. Simply take the following into consideration:
Benefit #1: You Will Have a Starting Capital
If your client gave you a huge project, you can expect that the first few months will be quite difficult.
You won’t have any immediate funds to start with. You won’t have cash for orders, employee benefits and incentives, and production expenses. Most of the time, businesses take out a loan just so they can get started with work. But with the help of a factoring company, you’re getting paid for your work quickly. In a way, it’s like the client has already paid you 80% in advance.
Benefit #2: You Get Your Money Fast
Have you ever tried getting a business loan from a bank or a credit union? It could take two months for a loan of $60,000-$100,000. When you turn to invoice discounting the procedure usually takes no more than five days. In just five days you’ll have your invoice purchased and the money deposited to your bank account.
Benefit #3: Credit History is Not a Factor
A new business will not have good credit standing. This is because it has little to no credit history to show. A business starting to fall off the grid will have weak credit scores to provide. In both cases, getting approved for a loan can be tough. However, factoring businesses do not look into credit history. Instead, the company will assess the value of the open invoice and of the client that is going to pay for it. This means that a small or new business that is still thriving or a company already leaning towards debt can still get money up-front to regulate cash-flow and stabilize its finances.
Benefit #4: Having a Wealth of Funds in Preparation for Seasonal Demands
As months go by your business will see a flux in demands. If you put out several or all of your open invoices for account receivable factoring you will have a steady supply of cash right from the start to prepare you for these issues. You never want to be caught off-guard and factoring invoices is a sure-fire means of being prepared, financially.
If you need immediate cash without suffering from the downfalls of a bank loan, approaching a factoring company is a very smart – and in many ways the best – option you can turn to. Check out the various factoring companies online and decide which among them will offer you the best deal.