Maintaining healthy cash flow is always one of the biggest challenges you face as a business owner. One of the best methods for improving cash flow is invoice factoring. It’s often a simpler solution than obtaining a traditional business loan. When you factor invoices, you receive payment up front rather than having to wait for customers to pay you. Let’s look at the top reasons to factor your invoices.
Top 5 Reasons to Factor Your Invoices
- Faster Than Applying for a Loan
When you apply for a loan, you often have to wait a long time before you know whether or not you’ve been approved by the bank. If you need funds right away, this waiting time can be frustrating. Invoice factoring is a much faster to get the money you need. You can often obtain funds within 24 hours of setting up factoring.
- Frees You from the Collections Process
Collections is a tedious and time-consuming process. Many small businesses don’t have a collections department or the one they have is under-staffed one. When you factoring your invoices, you can make better use of your time. You and your employees can concentrate on more productive tasks rather than having to worry about collections.
- Get Money Even if You’ve Been Turned Down for a Loan
Banks turn down businesses who need money for various reasons. This can happen if your business is new or you’ve had trouble paying back loans in the past. In such cases, even if you do obtain a small business loan it’s often for a small amount and comes with unfavorable terms. Invoice factoring is an alternative to loans as the process doesn’t require you to have a pristine credit history.
- Get Your Money Fast
One of the biggest advantages of factoring is that it frees you from having to wait for customers to pay invoices. Businesses typically have to wait over a month for clients to pay. When you factor your invoices, you receive funds right away from the factoring company. This gives your business more cash to work with for any purpose, such as keeping up with expenses and payroll, buying essential equipment or expanding your staff.
- Avoid Accumulating More Debt
While it’s sometimes unavoidable, debt can be a burden for businesses. Every time you obtain a loan, you go further into debt. This can have a negative impact on your credit rating. Invoice factoring is a way to obtain funding without taking on new debt.
These are some of the best reasons to factor your invoices. If improving your cash flow is something that could help your business, it’s important to find a factoring company that’s reliable and experienced.