Factoring invoices has been growing in popularity in recent years. It is considered a way for companies to get the cash they need, even if clients are not paying in a timely manner. With factoring, businesses receive an advance on outstanding invoices, giving them the cash flow needed to operate their business and achieve ongoing success.
If you own a business, you may wonder if factoring is a viable solution for your business. Keep reading to learn more.
Receive Immediate Cash
One of the biggest benefits offered by factoring is that it gives your business immediate cash. With this funding, you can fix cash flow issues and have resources to pay costs, and even accept new clients.
Offer Payment Terms to Clients
If you want to work with larger government and commercial clients, you will find they want to pay invoices on 30- or 60-day terms. Some even request 90-day terms.
For businesses that are unable to provide payment terms, the possibility of landing these companies is minimal. You can offer payment terms to your clients with factoring since you can finance their invoices right after they are created. When you do this, you can provide agreeable terms without any negative financial issues for your business.
Manage Customer Credit
A huge challenge related to providing clients payment terms is figuring out if they are creditworthy. Usually, factoring plans include a review of customer credit as a part of their solution. With this feature, you can outsource the process to professionals.
Simple to Acquire
With invoice factoring, you have a solution that is easier than most. The main requirement is that you have invoices for work that has been delivered and that is payable by creditworthy customers. Another requirement is that your business is free of any type of legal issues, encumbrances, or liens.
Increased Line as Needed
The lines are directly tied to your invoice balance. Because of this, they can increase if your invoices go up and if your client’s credit remains good. With this feature, it’s clear that factoring is a smart solution for any company that experiences aggressive growth and requires financing to keep up.
As you can see, there are a lot of factors that go into factoring. It is good to review the information above to determine if this option would suit your business and your needs. While it may seem confusing at first, the fact is it can be beneficial for virtually any type and size of business.