Small business owners often look for an appropriate method of funding so that they can continue to operate and expand their companies. An option that works well for businesses in industries that invoice their clients is invoice factoring. Here is some information on this type of financing. Which can help you quickly turn your pending accounts receivables into cash.
The Basics of Invoice Factoring
Since only companies that work with invoices can qualify for invoice factoring. It works well for businesses such as attorneys, consultants, staffing companies, and logistics companies. After you deliver products to or provide services for a customer, you send out an invoice. However, if you need the funds quicker than the time in which your customer usually pays, you apply to a factoring company for financing.
The Process of Invoice Factoring
Once your application for invoice factoring is approved, you identify the invoices you want to factor in and send them to the financing company. After vetting the clients, the factoring company sends you an advance of 80 to 90 percent of the value of the accounts receivables. The factoring company collects payment from your clients and sends you the balance of the invoice value after subtracting its fees.
Advantages of Invoice Factoring
Invoice factoring gives you fast access to the cash you need to run and grow your business. Once you have received payment, you can use the funds for any needs that your company has. The process of application is quick and easy. You can receive an approval even if your business has a poor credit rating. This is because the factoring company is more concerned with the creditworthiness of your customers. After you have established a relationship with a factoring company, the funding process becomes even quicker and simpler. Additionally, since the factoring company handles collections, you save time that you can devote to your business.
Choosing the Right Factoring Company
If invoice factoring seems like a good fit for your company, look for a lender with experience in working with your industry. A good factoring company should have an efficient online platform for applications and the submission of invoices, respond promptly to inquiries, and speedily supply the cash you need. When considering factoring companies, carefully compare interest rates and other fees.
For more advice on invoice factoring, contact Lode Capital.