FACTORING COMPANY: THIS COULD BE THE SOLUTION TO HELPING YOUR BUSINESS GROW

Invoicing clients and customers is a huge part of driving profit to any business, no matter the size. Additionally, as a small business owner, you are probably familiar with the headache that unpaid invoices can cause. 

If you are struggling to keep up with your invoices, there is luckily a solution. Factoring companies can support your business, promote growth, and help manage your invoices all at once. 

When you hire a factoring company to help manage your invoices, you can ensure your business gets fast access to cash when needed to support development and growth. The process of invoice factoring is simple – you sell your invoices at a discount to a factoring company in exchange for a lump sum payment. 

Invoice factoring allows business owners to get paid quickly without having to wait on their customers to fulfill unpaid invoices. Factoring companies will take ownership of your original invoice and pay you the total amount quickly, usually within 1-3 business days.

The cost of factoring is usually between 1%-5% of your total invoice. However, this percentage can vary from company to company. Additionally, many factoring companies have flexible terms, allowing you to choose which invoices you wish to factor.

Invoice factoring is a great way to promote growth for your small business and remove the headache of tracking down unpaid invoices. This process allows you to have fast access to your profit and increase the business’s cash flow. 

Let’s go over some of the 5 key benefits that invoice factoring provides for small businesses. 

1. Get Paid Quickly

One of the top benefits to using a factoring company as a small business is that you get paid quickly and efficiently. You’ll no longer be waiting on funds from unpaid customer invoices. This allows you to use your profit in real time to help grow and improve your business.

You can put these dollars directly into marketing, hiring more staff members, or loan payments. Invoice factoring is a great way to cover your short-term financing needs without having to wait the traditional 30 to 90 days to receive payment. 

2. Higher Chances of Approval

When applying for invoice factoring, your business’s credit score, loan history, and collateral are not key factors in determining your approval. For the most part, factoring companies look at your customer payment history. 

That means your chances for invoice factoring approval are higher compared to traditional means of financing, like business loans. If you need short-term financing quickly, a factoring company is a viable financial move for your business.

3. Promote Your Business’s Financial Growth 

With quicker access to funds from client invoices, you can focus on implementing ways to grow and improve your business. Once your short-term financial needs are successfully met, you can focus on a long-term growth strategy and investments. 

Additionally, quick access to funding allows you to invest in things that may improve your quality of work immediately, like hiring more staff, making repairs to your office or store front, and managing your business debts. 

4. Save Time & Money

As previously mentioned, factoring companies will take a percentage of your profit from your invoices. Usually, this number is somewhere around 15%. This may seem counterintuitive to creating financial health for your small business, but invoice factoring can actually help you save time and money. 

Managing unpaid invoices takes a lot of time, and someone is being paid to do so. That means tracking down unpaid invoices from clients can increase your labor costs significantly. Factoring companies take a flat fee that can be accounted for, allowing you to cut back on labor costs. Additionally, factoring companies tend to have flexible terms, meaning you are not tied into a long-term contract and can select which invoices you choose to factor. 

5. Improve Customer Relationships 

When you use an invoice factoring company, you can also help to improve your customer relationships. It is never fun to badger a customer to pay their invoices. It can be frustrating for both the customer and the business owner.

With an invoice factoring system in place, your clients can take their time paying invoices without feeling pressure from you. Instead, they simply send their invoices to the factoring company when they are ready to pay. You can spend more time making connections with your customers instead of making it seem like they are just another business transaction. 

If you are a small business owner struggling with unpaid invoices, contacting a factoring company may be the right financial move to help your business grow. You can spend less time, money, and resources chasing down payments from your customers and get paid quickly. 

For more finance tips, check out our picks for top finance podcasts to start learning more about financial management.