What You Should Know About Factoring
Factoring is a way to free up cash flow and business capital. Also called accounts receivable financing, it involves selling receivables, or invoices, to another company. This company is referred to as a factor. The factor works to ensure that the invoices are paid. This can reduce the time it takes to get payment on your business invoices, making it easier to have more money available for things like business expenses, expansion and employee payroll.
Steady Increase in Capital
With this option, as your sales grow, so do your financing options. This means that you are able to better meet the demands of your business as it grows. You will not have to worry about not having enough capital available when it is time to expand or make major purchases for your business.
Get Rid of Bad Debt
If you have bad debt, you want to get this settled as quickly as possible. When you have more money at your disposal, it is easier to pay off your debts. If you choose the non-recourse type of factoring, the third-party company you work with might also assume bad debt to help you get started on a more neutral footing.
No Additional Debt Incurred
When you take advantage of factoring, you are getting the capital you need without taking out a traditional loan. This means that you do not have to worry about things like monthly payments or interest piling up, so no additional debt is incurred.
Faster Invoice Payment
Third party company who provide this type of service ensure that invoices are paid faster. Most companies are aware that when this type of company is collecting invoices, if they do not pay the invoices, this will be reported to credit agencies. So, to avoid negative marks on their credit score, they are more motivated to pay their debts on time.
Professional Collection Services
You know that collections is not an inexpensive process, but when you use this type of service, they handle all of the collections needs for your company. This can eliminate a major expense and give you time to focus on more important aspects of your business. This is important because not only do you not have to worry about invoices being unpaid, but you will not have to handle chasing down anything left unpaid either.
As you can see, factoring can be a solid option for businesses of all sizes. It gives you one less thing to worry about and helps to ensure a more consistent flow of cash for your business.