As a small business owner, you have probably encountered situations when you had lean cash flows. During these times, you may not have known that you could work with a factor to sell your outstanding invoices. Although you sell your invoices at a discount, you gain immediate cash. These are some of the benefits of working with a factor.
You Receive Immediate Payment
When your cash flows are short or you have an emergency that requires a cash infusion, you don’t have a lot of time to apply and wait for loan approval. In these cases, you need an immediate influx of cash. When you work with a factor, you can receive your money within 24 hours.
You Don’t Need Credit Approval
Factoring does not typically require credit approval. As a small business owner, especially if your business is new, you may not even qualify for a small business loan. In addition, loans for small amounts are not typically approved. The bank wants to see a record of payment on your outstanding debt and a significant possible income from a large loan. Therefore, if you have imperfect credit, only need a small amount or haven’t established a credit history, you may want to consider working with a factor to gain quick cash. These companies typically approve your case as long as you have regular customers.
More Rapid Business Growth
If you are looking for a way to expand your company faster, you may consider factoring. Many small businesses don’t have the cash flow to grow consistently, much less quickly. You may be waiting for payments from your customers, and even pursuing a collections process can take time. However, if you have a great strategy for upscaling your business, a factor can help you get the cash you need to implement your plan.
No Restrictions on Your Cash Usage
When you work with a factor, you can use the cash you receive from your invoices in any way you want. For example, you can use it to increase your inventory or marketing, hire staff or invest in equipment. Whatever your company needs, you will have the cash necessary to provide it, and because you aren’t getting your funds from a bank, you don’t have to clear your purchases or investments with your creditors.
No Collections Process
A factor will purchase your invoices at a discount, but this purchase frees you from having to pursue collections. You will never have to try to collect the funds from the invoices you sell. Instead, your factor is responsible for collecting those funds. Therefore, you save money and time on the collections process.
Factoring can offer you many benefits. However, do your research on factors, terms and costs before selling your invoices.