As a small business owner, every now and then I would need an extra infusion of cash. Sometimes it’s about needing working capital to cover expenses such as overhead and payroll, as well as paying for supplies. Other times I need the money to fund my company’s growth by taking advantage of certain business opportunities which require money upfront. For example, a certain piece of expensive equipment becomes available at a considerable discount. The financing can get me that equipment to boost my business.
But nowadays, I don’t go to the bank anymore if I need to borrow money. I just let a factoring company purchase my invoices. It’s not just an alternative form of financing, but it’s actually one of the main forms of financing for me.
So why do I let a factor purchase my invoices? Take a look:
- I can get the money I need. Banks are nice, and they can actually help when you start a business. But the problem is that many banks are not really all that happy to lend money to small businesses these days. The rejection rate is appalling, and what’s frustrating is that you waste a lot of time in the process.
- I can get financing more quickly. Banks take a long time to decide whether to give you money or not because they have to check your company’s finances. They use this info to set how much they will lend you and at what rate. With that kind of speed, you can take advantage of many more opportunities than before.
- But with factors, the process is much quicker. At first you’ll probably need about a week to set up a factoring system. But after that, you’ll need as little as 24 hours and you’ll get your money.
- I can get only the money I need. The worst part of taking out a loan is that often you borrow more money than you actually need. This means that you’re paying interest for something you didn’t have to. It’s just plain wasteful.
- But a factor will only purchase my invoices. I choose which invoices to give to them, and the factor agrees to buy them when they confirm that the customer has a reputation of paying back on time on a regular basis.
- I can get the extra services that I need. When I have a factor purchase my invoices, I get several additional benefits than just an infusion of cash. For example, I no longer have my own collection department, because the factor does the collecting for me. It saves me a lot of headaches, since I don’t have to oversee and pay collectors. With all these benefits, it helps me to sleep better at night, knowing that I can get extra cash flow for my business whenever I need it.
- The factors also investigate new customers to see if they pay up consistently. I don’t have to do it on my own. And now I also don’t have to risk offering credit to new business customers who may not pay me at all.