How Do You Know if You Should Consider Factoring?

What Are Some Typical Benefits of Factoring?

Quickening their cash flow is the primary reason the majority of companies choose to factor. However, factoring provides many other advantages in addition to simply boosting cash flow.

• Rather than qualifying based on your own business history or credit, factoring considers the creditworthiness of your customer.
• Many factors provide free back-office support (including managing collections from your customers) which frees up more of your time and resources.
• You incur no debt by factoring because it is not a loan.
• Factoring is scalable; your funding grows as your receivables grow.
• Factoring is customizable and can be managed to provides necessary capital as your company needs it for continued growth.

Which Types of Companies Factor?

Factoring isn’t limited to a particular sized company or industry. Advancing cash on unpaid invoices is a proven way for start-up companies to expedite growth. However, many established, mid to large-sized companies also take advantage of factoring because of it’s streamlined approval process and relatively low expense. Factoring is common in many industries including government contracting, construction, transportation, and many more…  Factoring is the most beneficial to companies with a reliable client base that are using a net 30 or net 60 payment structure and have substantially more accounts receivable than accounts payable.

Why Does Getting Faster Access to Cash From Invoices Make Such a Difference?

Cash generated from factoring can be used to pay for additional employees, inventory, or any other expense necessary to expand their operations or build their business. Factoring allows a company to accept new business knowing that the orders placed can be filled using funds from the invoices (because there will be a net profit,) whereas before they may have had to turn new business away. Closing the gap from 60 days or more to merely a few days makes a huge difference for the growth many companies. Factoring works as a funding model for nearly any type of company regardless of that company’s size, industry, or financial background.

Do Any of These Sound Like You?

Your business is suffering from lack of operating funds even though your billable hours are in great shape. The problem is that your clients are sitting on their invoices as long as they can. They always pay… you just wish the money didn’t lag quite so far after the sale.

Or

You’re holding a significant number of unpaid invoices from clients who are in good standing but slow to pay… and you need funds to make payroll or cover manufacturing costs for current orders.

Or

Your clients are government agencies or major brands with great credit history. You’re thrilled to get their business but the terms of your agreement mean you’ll be waiting a significant amount of time before your payment comes through.

These are just a few situations where it would make sense to consider if factoring is a good fit for your business. If your day-to-day operations are suffering due to large outstanding invoices, factoring could be a viable solution.

Schedule a quick call to find out if factoring could work for you.