Receivable Factoring

Benefits of Using a Receivable Factoring for your invoices


Businesses are always looking for increased access to capital. Cash flow is a major concern, as it can effect how a business functions. If you don’t have enough money to pay your employees or keep the lights on, then your business will not be a success. This is why many businesses turn to a receivable factoring company for help. If you are looking for financing that does not come from a bank, then you should know some of the benefits of using a receivable factoring company.

 

What is Receivable Factoring?

Before getting into the specific benefits of invoice factoring, you should understand exactly what this service is. Receivable factoring allows businesses to leverage the money that is owed to them in order to get immediate capital. This means that a business can borrow money based on the money that is owed to them. Then, for a small fee the receivable factoring company will take on the debt and the


responsibility for collecting it. There are a number of benefits to this service, including:

 

-It can eliminate bad debt: If you have money that is owed to you a receivable factoring company can assume the risk of this debt and get it off of your books. This is especially important for small businesses and start-ups that might not have ready access to capital.

 

-You will be left out of the collection process: A good factoring company will collect the debt in a professional way and will eliminate the need for you to be involved, which cuts the cost associated with collecting an outstanding debt.

 

-Access to capital grows with your sales: The amount of money you can get will grow in direct proportion to your sales, which allows you to get access to a much larger amount of capital.

Receivable Factoring

-It is not a loan: Unlike bank loans, you will not be taking on an extra debt by using a factoring company. You will just pay a small fee and will not have to go into more debt, which makes it much cheaper and easier than a bank loan.

 

-Your invoices will be paid faster: If your business does not have the time to wait 30, 60 or even 90 days to get paid by clients then this will speed up the process.

 

-You’ll get useful customer information: Because the amount of money you are eligible to get is based on the strength of your customers, the receivable factoring company will do a thorough background check on them. The information they gather will be made available to you, which will give you some useful data about your customers.

 

-It is easy and fast: A bank loan can take weeks or even months to complete, which might not be fast enough to get you the money you need. Bank loans also require extensive paperwork and credit checks, which can also take time. Not only that, but you will need really good credit to get a loan from a bank, which is not the case with factoring companies, as they give you money based on your customer’s credit, not yours.

 

-You can take advantage of early payment discounts: Some of your suppliers might offer you a discount for paying early. This discount could actually offset the cost of using a receivable factoring company, allowing you to save money on the cost of doing business.

 

The Verdict

Just about any business can take advantage of receivable factoring to quickly and easily get access to the necessary capital. If your business needs money but does not want to go through the hassle and time of using a bank, then you should look into this service.