Using a Factoring Company – Alternative Business Financing

Getting business financing is still difficult for most companies, even larger companies with ample collateral. Most lending institutions are still careful with their money. They provide financing only to companies that meet the highest ratings, can provide impeccable financial statements, have strong cash flows, have plenty of collateral, and can show a long track record of growth.

The problem is that few small companies can actually meet these requirements. Where can entrepreneurs and small business owners go if they need funding?

Alternative funding

For the time being, you will need to use an alternative source of small business financing – at least until you can qualify for conventional funding. One increasingly popular solution is invoice factoring. It’s designed to solve cash flow shortages and can be deployed quickly.

Is this you?

Do you sell products or services to commercial customers? If so, you probably have to offer them credit terms, allowing customers to pay invoices in four to eight weeks, depending on your contract.

Few businesses have the necessary financial strength to offer terms to their customers and grow at the same time. At some point, slow payments affect your business. The three most common problems are:

  1. Your money is tied in slow-paying invoices. You have little actual cash to cover expenses.
  2. You miss payments to important suppliers. Or worse, you miss payroll.
  3. You can’t make additional sales because you can’t afford to wait for payment.

If you have one, or all, of these problems – invoice factoring may help.

How does factoring help?

Factoring allows you to finance your slow-paying invoices, providing immediate working capital. It improves your cash flow and provides funds to cover business expenses, thereby ensuring you can pay critical suppliers and employees. And, best of all, factoring allows you to offer payment terms to your clients with ease, providing a platform that you can use to grow your business to its potential.

How does factoring work?

Most factoring transactions have a simple structure. You work with a financial intermediary that funds your invoices and waits for payment. Most transactions have three steps:

  1. You invoice your client.
  2. The factoring company advances funds to you.
  3. Your client pays, which settles the transaction.

Most factoring companies can finance invoices in a day or two, putting your company in a position where it is getting paid almost as soon as you remit an invoice to a client.

Advantages of factoring

While a factoring solution has many advantages, there are two important ones. First, factoring helps solve cash flow issues created by slow-paying invoices, providing a more stable operating environment. But, more importantly, your company can offer payment terms to customers, knowing that it can always finance an invoice if it needs cash. This advantage lets you focus on growing your company, rather than on surviving from invoice to invoice.

Do I qualify?

To qualify for factoring, your company must do business with creditworthy corporate clients or government agencies. This point is critical because your invoices are the collateral financing the transaction. Also, it’s important that your invoices be free of liens and potential legal or tax issues. Lastly, your company must be well managed and have reasonable profit margins.

Factoring provides an alternative form of financing for companies:

  • With cash flow problems due to slow-paying customers
  • Who cannot qualify for a bank loan or business line of credit

Get more information

We can provide you with high advances at low rates. For information, get an online quote or call (877) 300 3258.