If you're a business owner who's been unable to get approved for a bank loan you might be feeling like you don't have any other options for financing. The good news is that you may still qualify to get immediate cash through the use of factoring receivables. Enrolling in a factoring agreement allows you to receive advance funds from your outstanding customer invoices. There are several ways receivables factoring can help your business.
Faster Access to Cash
The most obvious benefit of factoring receivables is the fact that you can get your money almost immediately. Many factoring companies advance the funds within a couple of business days after the agreement is finalized. This helps business owners avoid waiting the usual 30 to 60 days to be paid.
Removes Responsibility for Collecting
As part of the factoring agreement the factoring company assumes the responsibility of collecting on the outstanding invoices. This allows business owners to focus on operating their businesses rather than spending time on the phone trying to collect their payments.
A Cash Limit That Grows with Your Business
Unlike traditional loans, there is no cash limit with invoice factoring. The amount of money you are able to receive grows with your business. As your invoices increase, the amount of advance cash you can get from factoring increases as well.
Avoid Incurring Debt
Since factoring is not a loan participating in a factoring agreement does not cause you to incur any additional debt. This is particularly important for small businesses that may already have substantial debt on the books from their start-up costs. If you need to secure additional financing at some point in the future using a factoring company will not affect your credit in any way so you'll still qualify for the lending you need. You can also avoid having to use personal assets to guarantee financing when you factor receivables.
Speeds up Customer Payments
When a factoring company assumes responsibility for collecting on your customer invoices it's likely that your customers will pay their invoices faster. Many factoring firms submit credit information to ratings agencies so they are able to encourage customers to pay their bills on time rather than extending the payment period.
You don't have to wait a long time or spend your efforts in collections to get cash flow for your business. By taking advantage of the ways invoice factoring can help your business you'll be able to get the capital you need without the stress of collecting it yourself.