Invoice factoring can be a great way to solve your small businesses cash flow issues, because it can put immediate cash in your hands to offset the fact that your customers make slow payments. Through factoring, a steady supply of cash can be coming in, to smooth out all those gaps previously left by customers and their payment habits.
How invoice factoring works
The first step in invoice factoring is to find an alternative lender whom you can work with, and which fits your business objectives in terms of establishing and maintaining cash flow. After applying to that company for invoice factoring, there will generally be a fairly quick approval process, after which your company can begin submitting unpaid invoices to the factoring company.
The alternative lender will then provide your business with somewhere between 75% and 95% of the face value of those invoices, with the remainder to be paid once the invoice amounts have been collected from customers. The fee charged by the factoring company will be subtracted out of the total invoice amount, and your company will receive the balance. All parties involved benefit, because your company receives immediate cash, the factoring company earns a fee for its factoring service, and your customers will simply pay the factoring company directly.
Advantages of invoice factoring
In addition to the fact that it provides consistent cash flow for your business, there are some other advantages to applying for invoice factoring. For one thing, the approval rate is much higher than it would be for any kind of traditional loan, and the entire process works much more quickly than any bank loan could.
After approval for factoring, you can have money in your hands in as little as two days, as opposed to the months of waiting for a bank loan approval. In addition, you don’t really need to have a strong credit history to be approved, since an alternative lender would be more concerned with how promptly your customers pay their invoices.
Will factoring work for your small business?
Invoice factoring is a financial approach which can put immediate cash in your hands without you having to take out any kind of loans. Contact us at Business Capital Providers to find out how your cash flow problems can be relieved by invoice factoring.