Factoring for Software CompaniesPosted by Factor Funding Co. on March 22, 2013
Do you own or operate a software company? If so, you've probably faced the struggles that accompany restricted cash flow. Have you been denied for a small business loan or another traditional type of financing? Invoice factoring may be just the solution you've been looking for. Here is an overview of why you may benefit from considering invoice factoring for your software company.
Invoice Factoring vs. Small Business Lending
Many software companies make use of small business lending when they need to increase funding quickly. But, small business lending can pose several concerns for the entrepreneur. First, financial institutions have greatly tightened their lending requirements, which makes it difficult for some business owners to get their loan applications approved. Another issue is that taking on additional debt such as a business loan can put a company into a precarious financial situation. If a customer doesn't pay an invoice on time, a business could very well go under due to the increased strain on the budget.
Invoice factoring, though, frees a company from these concerns. Since factoring is not a loan, a company owner can sign up for it several times without worrying about how it will impact the balance sheet. Factoring companies do not require that company owners pass credit checks or qualifications in order to get their requests approved. Businesses only need to have creditworthy customers to receive factoring.
Why Invoice Factoring is a Perfect Fit for Software Companies
The exact atmosphere of each software company varies according to the type of services it offers. However, many software companies thrive on a high-intensity, fast-paced environment. Some factoring firms allow companies to handle their entire transaction online, which is definitely a positive aspect for software companies who accomplish most of their work in a virtual environment.
Since software companies may have to come up with funds right away, they often cannot wait two to three months to be paid for their services. This is one of the reasons why invoice factoring is an ideal arrangement for software businesses.
Factoring gives entrepreneurs the flexibility they need to make room for unexpected or sudden costs in their budgets.
For example, if a software engineer suffers a system error and needs to purchase new equipment, the owner could use invoice factoring to get access to increased cash flow to pay for a new system or server without having to wait for an outstanding invoice to clear. Bidding on new projects is another situation that calls for cash flow flexibility. With invoice factoring, a software company owner can place a bid on a project with confidence, knowing that he or she will have the additional capital needed to complete the order.
Does your software company need to get increased access to cash flow in a hurry? Why not consider invoice factoring today?