There is good reason to consider invoice factoring for your small business, regardless of whatever industry you might happen to be involved with. This is because cash flow is important to all industries and all small businesses, and if you don’t have good positive cash flow, it’s very possible that you won’t be in business for very long. This is especially true for those businesses which depend on customers who pay for their goods more slowly rather than immediately. In situations like this, invoice factoring can be a perfect solution to your problem.
How It Works
Invoice factoring involves having a factoring firm pay your company some percentage of the invoice amounts on your monthly invoices, usually somewhere between 80% and 90% of their face value. At that point, you would receive immediate cash which you could use for any business purpose, and the factoring company would take ownership of the invoices and be responsible for collecting on them.
This would relieve you of the necessity of waiting for your customers to pay those invoices, and you would already have the cash so as to maintain good cash flow. Once the factoring company collects the money from your customers, the remainder of the invoice amount would be paid directly to you, after the factor subtracted their fees for the service.
Benefits of Invoice Factoring
Apart from the fact that you don’t have to wait for your customers to pay their invoices, you would also receive immediate cash to keep your business operating smoothly. It’s very easy to obtain approval from a factoring company, provided that your customers typically pay their invoices promptly. Your personal credit history and your business credit history are not really factored into the approval process. You also would not be obliged to dedicate personnel in your company to perform collections operations, since that function would be outsourced to the factoring company. From a number of different perspectives, invoice factoring makes a great deal of sense for any small business.
Is Factoring Right for Your Small Business?
Many small businesses have been helped by invoice factoring because it puts cash in your hands immediately. If you think factoring would be of help to your small business, please contact us at First Source Capital.