Accounts Receivable #Financing Part 2: Five Reasons to Consider #Factoring Your #Invoices

Businesses understand the need for continual cash flow on a day-to-day basis--it is the lifeblood of business! The natural ebb and flow of business income make some weeks a (financial) breeze while others may have you questioning whether you can make payroll the following week.

Because many business owners are unable to get funding from their bank, many savvy business owners are turning to alternative means when it comes to generating a consistent cash flow.

Last week I published a post introducing factoring and how it works. If you are new to factoring, read it here first: Accounts Receivable Financing: A (Very) Brief History, What it is, and How it Works.

Why Factor?

Now that you know what factoring is, you may be asking, "why factor?"

 1. Obtain Cash Without Debt

Selling an invoice is NOT the same as a bank loan. Even if you are able to lock in a good rate at the bank, it is still a debt on the books. Debt financing certainly can be a great solution, but it may not always be the best option for your business. 

2. Get Cash Fast

Factoring invoices are extremely fast. As a matter of fact, once your account is set up you will often receive cash within 24-48 hours – every time you factor an invoice. Try comparing that to traditional debt financing. 

3. It Is Not YOU, It is Your CLIENT That Matters

I know what you are thinking, "Kyle just said I don't matter."READ CAREFULLY: A factor is going to look to the strength of your client because they are the payor, not you. This is good news if you have seen a dip in your credit score or a drop in revenue. Plus, it can help you avoid offering terms to a customer that is not a good risk.

4. Selling Invoices Is Your Choice

You don’t have to factor every invoice. You are given the flexibility to get money when you need it. If you don’t need additional cash, don’t factor any invoices. If you need extra cash, factor additional invoices for an additional capital infusion.

5. It Is Your Money

The factor is not going to tell you what to do with the money they send you. In other words, they are not going to say you have to use it to pay this bill, that bill, or buy a certain piece of equipment. The bottom line is you need cash, not a boss. Because it is your money you get to spend it where you think is best.

Now What?

Most businesses start factoring out of a need. They realize the need to expand or the need to get additional cash to stay in business. Whatever the need, many continue to use factoring even after their immediate need was met. Their only frustration was wishing they found factoring sooner. 

Do you want to learn more about factoring invoices? Contact me.