5 Ways Information Technology Companies Can Benefit from FactoringPosted by Factor Funding Co. on July 21, 2015
Information technology companies face a market that is constantly changing, often at high speeds. Having the cash on hand to meet these ever-changing market demands can make or break a small information technology company. Factoring can help such a company stay on top of the market changes and take the necessary steps to grow and thrive.
How Can Factoring Benefit I.T. Companies?
Here are five ways information technology companies profit with factoring:
- Access to debt-free, non-interest bearing working capital. If you take out a loan or open a line of credit, your company is taking on debt. While most companies cannot avoid taking on some debt, too much debt can cause long-term problems. It makes the company less flexible and makes investors nervous. Factoring gives you an infusion of cash without taking on debt.
- Have the ability to meet operating costs. Cash crunches can kill even the most successful I.T. companies. If you are struggling to meet your rent, your utilities, or your payroll, factoring can help. Instead of having most of your working capital tied up in unpaid invoices, you can have the cash to meet your operating expenses and keep moving forward.
- Be able to expand into emerging markets without securing new sources of financing. With the ever-changing landscape of the I.T. industry, new markets can emerge quickly. If you don't have the funds to get into the next hot market, your company will be left behind. Factoring allows you to free up the necessary cash to buy those new products or to expand your company's service offering.
- Get access to deeper discounts from vendors to increase profit margins. When you place a large order, you will find that many vendors are willing to give you a better per-piece price than for smaller orders. The lower the cost of each item you purchase, the higher your profit margins are going to be. This can be the critical turning point in growing your business and taking on bigger clients and orders.
- Save on overhead costs by outsourcing collections. Your business is I.T. You are not in the collections business. You should not be paying one of your employees to perform collection duties. When you go with factoring, you don't have to worry about having to pay an employee to make collection calls. The factoring company handles all of that.
Cash flow can make all the difference in taking your information technology company to the next level. It can give you the opportunity to take that big order from your most important client. It can help you hire the people you need to expand into a new market. It can give you the cash flow you need to move into the bigger space you desperately need.
And you can get cash flowing by factoring your outstanding A/R invoices.