3 Good Reasons to Call an Invoice Factoring Company
Written by US Funding on November 19, 2015
Successful small business owners can get cash for rapid growth, large orders or projects, good investment opportunities in a number of ways. If you’re a small business owner, you may opt to take out a small business loan, tap into your credit cards, or even use equity from your own home or your business equipment.
Each of these methods has several drawbacks, though. Bank loans take a long time to close, and you really need to have your ducks in a row before you can even apply. Factor in the low acceptance rate for borrowers, and you may find it’s hardly worth the trouble. Credit cards come with high interest or the risk that you won’t be able to pay the money back before your low introductory APR period ends. Using your home as collateral is not a good idea, because you’re putting yourself and your family at risk. Similarly, if a business deal does not go as planned, you don’t want to jeopardize the equity you may have in your office building or any investment properties you may hold.
Still, you don’t want to miss out on a growth or profit opportunity due to cash flow issues. That’s where invoice factoring comes in. First, let’s take a look at exactly how invoice factoring works, and then you’ll be able to see the benefits clearly.
What is Invoice Factoring?
When you contact U.S. Funding for invoice factoring, we will purchase your company’s unpaid invoices. You’ll receive the cash amount of the invoice minus a small fee. Invoice factoring is not a loan. Your vendors and clients will then pay the factoring company when the invoices are due.
1. Invoice factoring costs less than credit card or business loan debt.
Invoice factoring rates are lowering than ever, which means you get to keep more of your money when you sell your unpaid invoices to U.S. Funding. When you compare it to the high-interest rates of credit cards or business loans, you’ll find invoice factoring is well worth the cost. Best of all, there is no risk. The cash is yours, and it’s up to the factoring company to collect on the Accounts Receivables.
2. Extend trade terms to your clients and foster good will and loyal customers.
Everyone likes to “buy now and pay later” without ramifications or high interest rates, but promises to pay in 30, 60, or 90 days don’t keep your business running. Invoice factoring allows you to extend trade terms to your customers as incentives to continue doing business with you. But you’ll receive your cash right away.
3. There is no risk with invoice factoring.
Your invoices are not used as collateral in a loan, because invoice factoring gives you cash up front that is already yours. You aren’t borrowing money. It is up to the factoring company to collect on your Accounts Receivables. In fact, some customers have more respect for a factoring company, viewing us as a collections agency, so they will pay their invoices faster. This is good for the factoring company, but it doesn’t matter to the small business owner. Either way, you’ll receive cash for your invoices right away. It’s important to note that invoice factoring is not the same as collections. We can only purchase current unpaid invoices, not invoices that are already past due.
If you need cash for your business to meet payroll, invest in new equipment, or take advantage of growth opportunities, invoice factoring is the choice of many small business owners today.