Invoice factoring offers many benefits for companies of all sizes especially those with small staffs and less than perfect credit. Among the most noted benefits of factoring is the ability to produce needed cash very quickly. But there are other reasons why factoring is so advantageous for companies. Here are five reasons why a company should factor invoices.
1. Factoring makes it possible to raise fast money.
The factoring process can be completed in a very short amount of time, usually within a few business days and sometimes in as little as 48 hours. A bank loan, however, can take weeks to close before you receive the funds. This quick turnaround time is especially beneficial for businesses that are suffering a cash crunch and need fast access to cash for expenses.
2. The factoring process streamlines your accounts receivable duties.
When you factor your invoices the factoring company assumes the responsibility for collecting on the invoices. This means that you won’t have to worry about performing your usual accounts receivable duties such as sending out invoices or making follow up collection calls. Some factoring companies will even keep customer records for you, saving you the trouble of file storage and maintenance.
3. With factoring, you can increase cash flow without going into debt.
The most common form of business funding is small business lending from traditional institutions. However, taking out a new bank loan requires you to open a new line of credit, which could be a difficult step if you’re already extended on other credit accounts. With invoice factoring, you can avoid additional debt.
4. You can qualify for factoring with bad or no credit.
While getting a bank loan can be a struggle for a company owner with other debts, it can be almost impossible for a business that has no credit or bad credit. Invoice factoring, however, doesn’t require you to be creditworthy at all. The entire arrangement is based on the creditworthiness of your customers, rather than yourself. This gives small and developing businesses a chance to build up their cash flow, even if they don’t qualify for a loan.
5. Factoring reduces your collections period.
Factoring also shortens the time you’ll have to spend doing collections. Instead of following up on customer invoices, you can get right to work on new projects or new customer accounts. The factoring company will take care of all the collections work for you.
Invoice factoring offers many benefits to businesses including a fast cash advance period, a streamlined collection process and the ability to increase funds without taking on debt. After reviewing the five good reasons why a company should factor you might decide that invoice factoring is the best cash advance option for your business.