Business owners are mostly frustrated because they have to wait for invoices to be paid. Especially if they don’t qualify for traditional business loan, then they face a huge cash flow between billing their customer and getting paid. The lack of cash flow is a main reason for a business failure.
Invoice Factoring will empower a business owner to invest in equipment, pay vendors, payroll and any other financial needs of the business. The other option is to wait for your customer to pay and delay everything else while the cash is tied up in the collection process. If you use invoice factoring, then rest assured you will see cash for your invoices.
Now to answer another significant question when it comes to invoice factoring which is can any business benefit from it? The answer to this question is YES, any business can use invoice factoring. It is effective way of finance for both small businesses and larger companies. There is aneligibility criterion which factoring companies will look for which are:
- The origin and size of the invoices you are asking payment for
- Duration of payments
- Potential risks
- Your company credit score and reputation
The last requirement is not important because the real risk of factor is the credibility of your business owing the unpaid invoices. The reason for this is that all of the factoring companies are more interested in your customers credit rather than your business.
Although invoice factoring is an exceptional idea for start-ups and companies with poor credit score to get finance more effectively, the rates for less established business and companies with poor credit may be slightly higher.
There are many benefits of Invoice Factoring which you need to understand to make a better decision for your business. Since, it is an alternative source of funding for your business, it will eliminate many roadblocks posed by regular bank loans. You don’t need a business plan or tax statements to apply. It is most definitely not a loan and does not show up on your balance sheet as debt. It does not include bank because it is a direct financial transaction between a business and invoice factoring provider.
Another significant benefit is that it will free up your working capital. Various businesses have a significant amount of capital which is stuck in accounts receivable. The purpose of invoice factoring companies is to convert business assets into immediate cash which will enable you to meet expenses.
Invoice Factoring will also save your valuable time. It will enable you to focus on selling, producing and growing your business exponentially. It is the preferred finance as compared to a traditional bank loan and will enable you to raise cash immediately. If you need quick and steady access to working capital to keep your business operating at best cash performance, then invoice factoring is the best option for your business.
Invoice Factoring Brokers:
Any person or firm which will take your business accounts receivable package to financial firms is known as Invoice Factoring Brokers. These financial firms will place bids on your receivable accounts. The broker may take your business receivables to open market or present them directly to a certain group of factoring companies. The factoring broker is merely an agent to find someone who will purchase your receivables.
The factoring brokers are extremely professional and reliable. They usually develop personal relationship with their clients and give them personalized service, even to large companies. Invoice factoring brokers are experts in their field and will provide you with detailed information and consultations. The reason that invoice factoring popularity has increased is the broker networks, bank lending restrictions and financial reasoning. You can hire these professionals conveniently as they work from anywhere in the world.
If you have a small or huge business, hiring a factoring broker to facilitate your business receivable invoices is an excellent choice. After you hire a broker you can benefit from their knowledge and ask all the questions you have in your mind about invoice factoring. Moreover, you can also benefit from their experience which they have gained by working in the industry for so long. Another significant benefit is that you will be able to use their highly trusted network of contacts and increase your exposure in the industry. We all know doing business is so hectic as it is and time consuming as well, hiring these individuals will save you a lot of time. As these brokers will also conduct research for you about the open market or bidding financial companies.