Dealing with working capital requirements can be complicated at times. Cash resources are more than important for managing regular operations, and you also need funds for fostering new ideas. If you have a lot of pending invoices, you can consider invoice factoring as a better way of getting a quick advance. In simplest words, invoice factoring is all about selling due invoices to a factoring company for immediate funds. The factoring company will pay your business in two parts. The first amount is deposited within seven working days and can be as much as 95% of the invoice total. The second amount is paid when the debtors settle their dues.
There are many reasons to consider invoice factoring, and some of them are mentioned below.
- With invoice factoring, you can easily work with customers with long payment terms. Credit sales are often necessary, because you need to build long-term relationships with your customers. By using this form of financing, you can convert the pending invoices into cash as and when required and don’t have to wait to get paid.
- This kind of financing also works for smaller businesses and startups that have limited resources in general. Instead of going for a traditional loan, one can contact a factoring service and get paid in a week.
- There are no complicated terms in invoice factoring. You don’t need to pay any interest, and the right factoring company will always explain their services and charges in advance, so there is no risk of being cheated.
- With invoice factoring, there is no wait for approval. You can get an approval in just 24 hours, and once the application is processed, you can get the funds via wire transfer within a week, which is a huge advantage.
- Thanks to factoring companies, you never have to delay your payments to creditors. Whenever a few bills are due, you can sell the pending invoices to get the right amount. In some cases, payments are transferred with 48 hours.
- This kind of financing doesn’t impact the balance sheet or the assets of your company. You don’t need to bother about complicated collateral terms, and you share in the company is retained.
- Finally, invoice factoring also works when you need smaller amounts. Banks are often interested in knowing your creditworthiness, but factoring companies just want to know your debtors.
Check online now to find more on factoring services!