Factoring for IT Companies

Posted by Factor Funding Co. on March 1, 2013

IT companies often face their own struggles when it comes to finding reliable sources of funding. Many information technology businesses are start-ups, which means that they may rely heavily on private investors who are willing to put up seed money for several years before the company shows a profit. But what are the options when your primary investors are unable or unwilling to contribute any longer? Invoice factoring may be an ideal solution to this problem.

Invoice Factoring vs. Business Lending

Invoice factoring offers several benefits over small business lending. For example, if you were to apply for a small business loan at a traditional bank, you'd have to submit to an intensive audit of both your personal credit history and your business's profitability. Even if you have spotless credit, a bank may be hesitant to lend you funding until your business has demonstrated a track record of profitability. These criteria can make it very difficult to get financing if you've recently opened your business.

With factoring, though, you don't have to worry about passing a personal credit check or proving the worth of your company. All you need is a client who has a satisfactory credit record and a good record of paying his or her invoices on time and you'll be eligible to factor those invoices and receive cash up front!

Another way invoice factoring can be of benefit is the speed at which you can get your money. If you qualified for a business loan, you may have to wait weeks or even months before the cash would be disbursed to you. On the other hand, once your factoring request is approved, you could have your funds within a couple of days. Some companies have even received their advance in 24 hours!

How Can Invoice Factoring Help Your IT Company?

Information technology companies have to operate in a very fast-paced environment that can be both exciting and demanding. One of the reasons that factoring is such a good fit for the IT industry is the flexible access to cash flow that it offers. Much of the invoice factoring application process can be handled online as well, which suits itself to the computer-intensive atmosphere of IT.

So, if you're currently dealing with a lean cash budget in your IT company, you might want to give invoice factoring a try. This quick funding option can make or break your business's bottom line.

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