6 Benefits of Using Factoring in Your Business
A solid cash flow is essential for maintaining business operations. However, sometimes you can’t wait 30 or 60 days for revenue from invoices. When there are urgent financial needs, invoice factoring can give you an instant infusion of capital. Here a six benefits from deciding to factor accounts receivables.
Excellent Upfront Cash Amounts
The details of your merchant cash advance arrangement vary from lender to lender, but it’s common to receive around 80% of an invoice’s value instantly. The remaining amount, minus a small percentage, is given to you after the customer makes payment. For an invoice worth $1,000, your company would receive $800 right away to use for its business needs.
No Collateral Assets Required
When you apply for a loan from a bank, you often need to put up some form of collateral. Depending on the size of the loan, you may have to use business assets such as vehicles, real estate, equipment or heavy machinery. This can put your property at risk if you have a hard time making payments. With factoring, you don’t need any collateral. Instead, you receive a cash advance on the value of your invoices.
Systems Designed for Businesses
Modern systems for companies working with a factor are designed to save you time. Once you’re approved and ready to go, you can add new invoices quickly. You don’t have to worry about extensive paperwork. The system takes care of approval and cash advances for you, delivering funds to your bank account in a short time.
Capital for Business Growth
Merchant cash advances can be an incredible tool to grow your business. They let you take advantage of excellent opportunities for expansion. If you need money for a down payment on new equipment, you don’t have to use capital from your savings. You can also use invoices to take care of payroll or purchase inventory.
Access to Professional Collection Services
In a perfect world, your customers would always pay on time. Unfortunately, you can’t always depend on prompt payment. With a factor partnership, you don’t have to worry about debt collection.
Credit Score Protection
One of the biggest advantages of using invoices for funds is that it keeps your credit score safe. Because you’re receiving a cash advance for a financial asset, and not a loan, there’s no debt. Your business literally has nothing to lose.
Small businesses depend on sales to take care of monthly expenses and invest in resources to increase profits. Factoring can be a great way to get the capital you need.