As a whole distributor, you understand the role a healthy cash flow can play in your business' success and profits. Despite needing a steady flow of money coming into your company, however, you have little control over how fast your clients pay their outstanding invoices to you.
When you need to focus on keeping your business afloat and meeting your customers' demands, you may not have time to send out collection letters, make phone calls and ask that your money be paid to you on time. Rather than bank your business on slow-paying clients, you can take advantage of these unique and helpful benefits that come with invoice factoring.
1) Fast Approval Times and Quick Access to Cash
You may well know how long it can take to be approved for a bank loan. When you need money now, you do not have time to wait for a loan officer to scrutinize your business and financial records, only to turn you down or approve you for a smaller amount than what you need.
When you choose factoring, however, you can be approved in one or two days and quickly get the cash you need to carry on with your business obligations. The amount of money for which you are approved will depend on the sum of your outstanding invoices and how reliable your clients are. Even so, you can expect to get your money much faster than applying for and waiting on a bank loan.
2) Easy Approval Criteria
If you lack the credit to go to a bank and ask for a loan, you can avoid having to sell off your own personal assets or borrow money from friends and family by using factoring. With factoring, your approval will center less on your credit score and more on the payment histories of your invoice clientele.
If these people and businesses have good records of paying their invoices, the factor may purchase your accounts receivables and in turn give you the money that you need today. You escape having to wait for these individuals to pay their invoices and can continue on with your daily business tasks with the money you need in hand.
3) Relief from Invoice Collecting
You risk your business' success when you take time away from your important duties to collect on outstanding debts that are owed to you. When your clients owe money on their accounts, you must call, send out letters, and otherwise make contact with these people to ensure that they will pay their balances quickly.
When you sell these accounts receivables, however, your factor relieves you from that obligation and will take over collecting these balances. You can return to running your company with an intact cash flow without the worry of how or when you will collect on those invoices.
4) Meet Customer Demand and Meeting Daily Operational Expenses
A healthy cash flow is vital to meeting the demands and wants of your customers at any given moment. You must be ready to act and satisfy your customers if you want to keep their business and maintain your company's good reputation.
When you factor your invoices, you avoid the embarrassing potential that you may not have the money on hand to remain a viable presence in the business industry. With the cash you get from factoring, you can:
- Buy inventory
- Fill customer orders
- Meet with and woo new customers
- Pay utilities and other daily costs of running your whole distribution enterprise
These expenses are a part of keeping your business attractive to customers and operational on a daily basis. Factoring gives you the funds you need to meet these costs.
5) Filling Large Customer Orders
When you take on a new customer who places a large order with you, you may be left scrambling for cash if you have invoices that are unpaid and a cash flow that is significantly compromised. Rather than allow large orders to escape you, you can fill these demands comfortably by using factoring for this purpose.
Factoring lets you pay manufacturers for the products you need without you becoming a delinquent invoice client yourself. You also reap the financial rewards of filling large orders and get cash you can reinvest back into your business or use to expand your company into new markets.
Maintaining a healthy and financially viable wholesale distribution company requires that you have a steady cash flow at your disposal. You can enjoy these benefits and have access to money when you rely on factoring for your company's cash flow needs.