For a business to operate smoothly, it’s always ideal to have cash on hand and readily available. That’s why working with money factoring companies has many advantages.
Money factoring companies allow businesses to receive cash quickly – typically within 24 hours. Because cash flow usually fluctuates, B2B companies consider factoring financing an excellent, quick, and easy funding solution.
Commercial factoring companies purchase unpaid invoices from businesses – paying them upfront with a large chunk of the amount owed.
Compared to traditional bank loans, small business invoice factoring companies can give out approvals much more quickly. Other benefits of small business factoring include the fact that it doesn’t involve long-term debts and contracts. Plus, the fees are typically lower with factoring.
Benefits of Working With Money Factoring Companies
For B2B companies, it’s common to issue invoices and wait for several weeks to receive the payments. Typically, the payment terms for these invoices are 30 to 90 days – significantly affecting the company’s cash flow.
To avoid problems with cash flow, you can turn to the best invoice factoring services for help. Business factoring companies purchase unpaid invoices at an amount lower than their value. However, they allow your company to quickly receive the funds you need.
In the United States, approximately 28 million small businesses can benefit significantly from business factoring services. By providing upfront payment amounts up to 90% of the original invoice value, factoring companies allow small businesses to bridge the gaps between invoice payment periods.
Business invoice factoring can also relieve you of the burden that comes with collecting invoices. Plus, you have immediate cash that you can use for your company’s day-to-day operations or invest in growing your business.
Factoring helps you convert unpaid invoices easily into instant cash and provides your business with the flexibility required to keep abreast of rising demands. The following are some of the benefits you’ll enjoy:
- Obtain prompt payment of invoices: Most invoices typically get paid within 30 to 90 days. With factoring’s fast processing, you can receive immediate payments within a day.
- Prevent constant checks on your credit rating: Unlike bank loan applications that involve checking your credit score, invoice factoring companies will check your customer’s credit rating instead.
- Reduce the amount of paperwork required: Because invoice factoring is simpler than loans and other forms of financing, it necessitates less paperwork.
- Eliminate the need to get investors: Invoice factoring services can provide your business with immediate cash flow, so you won’t have to get investors just to have more funds.
How Money Factoring Companies Work
Your business will require readily available funding to help it grow and keep up with the competitors. Not only does your company need funds to maintain daily operational expenses and for employee wages, but you also need cash for purchasing additional inventory or equipment. If funds are not available, how will your business continue its operation?
For invoice factoring to help you with quicker invoice collections without needing to follow up or put pressure on your customers, below are the steps involved:
- First, you need to provide the factoring company with a copy of the unpaid invoices.
- The company will buy the invoices from you and give you immediate cash between 70% and 90% of the original invoice value.
- They will perform the invoice collection themselves and handle it the same way a collections department does.
- Once your customers pay the factoring company the full amount, the latter will give you the remaining balance minus their professional fees.
However, remember that invoice factoring is different from a line of credit that you get from traditional banks. The approval process for a conventional line of credit involves checking your company’s credit rating and reliability. On the other hand, invoice factoring focuses on the credit score of your customers.
Another advantage you’ll enjoy with factoring is that you can eliminate the lengthy application and approval processes typically associated with bank loans.
Get Factoring To Maintain and Boost Your Business
With most customers waiting until the last minute to pay off their invoices, you don’t have to let it affect your company. Business and freight factoring companies provide you with the best solution for immediate funding. Make sure to compare rates and options, and go with the company that gives you the best possible terms and fees – helping you grow your business.