25 Jun How Factoring Can Add Flexibility to Your Business

As a business, you need to make sure that you have all of your finances in pristine condition at all times. If money isn’t coming in to cover expenses like utilities and payroll, you could be in big trouble. 

Overall, it’s ideal for companies to have flexibility when figuring out their financial situation. If you always find yourself strapped for cash, then it could limit your ability to thrive and succeed into the future. 

At first, most small businesses will try to add flexibility by taking out loans or opening lines of credit. While these methods can assist in some situations, the downside is that you have to pay interest fees, which can add up quickly. Instead, you may want to try invoice factoring. 

What is Invoice Factoring?

Simply put, this process is when a company assesses your outstanding invoices and then takes ownership of them. In exchange, you get a majority percentage (typically 70 to 90 percent), and then receive the remainder once the invoice is paid. Factoring costs a fee, but it can usually be far less than credit interest rates. 

Here are a few ways that factoring can add flexibility to your business. 

Unexpected Expenses

For most companies, cash flow isn’t a problem as long as everything stays at “business as usual.” However, if you find yourself with a major expense and no cash on hand, factoring can provide you with immediate funds without having to borrow from a lender. 

Fast Cash With No Credit Checks

One of the primary benefits of invoice factoring is that these companies don’t check your credit – only that of your clients. That means that even if you’re still new and don’t have much credit history, you can get the cash you need ASAP. Lenders and banks take time to assess your level of risk, while factoring can be a lot faster. 

Use it When You Need It

You may think that factoring is an ongoing process, meaning that a factoring company will be in charge of your invoices for the long term. However, the reality is that you can choose which invoices to assess. 

So, if most of your accounts receivable aren’t substantial enough to get factored (or they usually get paid quickly), you don’t need to use this service. However, once you get a big invoice and you can’t wait for the money to come in, factoring is there to help. 

Bottom Line – Be Flexible With Factoring

Not all businesses can benefit from factoring (usually B2C companies don’t have this luxury). However, if you typically find yourself with outstanding invoices, this process can enable you to be adaptable whenever necessary.