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Invoice Factoring: Big benefits for small businesses

· Invoice Factoring,Small business,Startup,Financing tips

Invoice Factoring: Big benefits for small businesses

Invoice factoring can make a big difference in the way small businesses operate as a timely influx of cash will help the small businesses expand or increase productivity. Invoice factoring may be defined as any financial transaction where the particular business sells all its accounts receivable and invoices to a company in order to free up their cash reserves.

Terms like “receivables financing,” “Invoice financing” or “accounts receivable financing” are used interchangeably while referring to Invoice Factoring.

 

How to know if Invoice Factoring is the right choice?

  1. Any small business is selling products/services to established customers- Larger established customers would mean larger orders and longer payment terms. This often creates hurdles in the line of cash flow. Banks often need a history of good track records before they can trust the small businesses with their money. Now the invoicing company steps in, which understands that the business has reliable customers and good and predictable cash inflow.

Terms like “receivables financing,” “Invoice financing” or “accounts receivable financing” are used interchangeably while referring to Invoice Factoring.

  1. Any entrepreneur who likes to run the business in their own way-A key quality of any successful entrepreneur is the fact that he/she understands the business and wants to run the same in their own way. However, financial institutions like banks have strict regulatory policies that do not always line up with the way the entrepreneur envisages things. Invoice Factoring companies allow that freedom and so much more.
  1. Everyone needs working capital- The benefits of working capital is undeniable. Getting access to capital is perhaps the single most important thing in running small businesses. Fluctuations in the market, supply costs, and other conditions often hit the small businesses brutally and hence it is best for small businesses and startups to indulge in Invoice factoring.
  1. Latent cash sitting in A/R- Many a time, customers are slow in paying the bills, and with unpaid invoices accumulating, the balance becomes unfavorable towards a particular side. In this case, the accounts receivable end up being much higher than the actual money the company has.
  1. The business cannot get the attention of the bank- Small businesses are often overlooked by the bank as they mostly want to deal with established businesses and larger corporations. Invoice factoring companies help any business or startup irrespective of their size and capacity. The only pre-requisites are a good growth curve and that the company must have a good transaction history. Being collateral focused; the invoice factoring companies have no strict regulations that prevent small businesses from approaching them.
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