Factoring Services: Not Just for Struggling Small Businesses
Written by US Funding on September 11, 2015
If you’re familiar with factoring services, you may think they are only for companies who are struggling to pay their bills every month. Certainly, if a small business encounters that age-old problem of “too much month at the end of the money,” factoring can help without the hassles of high-interest, complicated bank loans or credit card debt.
But a small business that’s doing well may also want to consider the benefits of factoring services to assist during a stage of rapid growth, to take advantage of new market opportunities, or to ensure they stay cash flow positive when they take on new customers on trade terms.
Factoring Services v. Bank Loans
Taking advantage of factoring services is not the same as taking out a bank loan. When you use factoring services, your business receives an advance on money expected to come in, and U.S. Funding handles invoicing and collections from your customers. Essentially, you’re selling unpaid invoices to U.S. Funding at a price slightly lower than the invoice’s total value. You, the business owner, get the cash you need upfront, and the factoring company takes care of the rest of the collection process.
Factoring services are easy, putting cash in your pocket with no intricate application process, no interest and fast approvals. If you take out a bank loan, you will be paying it back long after the cash is spent.
Factoring services, on the other hand, are scalable. If you need money right now, you can factor some of your invoices to cover expenses or take advantage of opportunities. There is no loan to pay back. If you discover, the next month, that your business is in a comfortable position with cash flow, you don’t have to factor any invoices.
Accommodate Rapid Growth with Factoring Services
If you run a B2B company, you may sign on new customers with trade terms of Net-30, Net-60, or Net-90. This can wreak havoc on cash flow, since you’re laying out money and doing work today but won’t get paid for months. Factoring services take the sting out of trade terms by paying those invoices to you immediately for a small fee, so you can pay vendors who require payment immediately, from credit card companies to your building lease.
Take Advantage of Market Opportunities
One sure sign of a successful small business is having the agility to take advantage of opportunities as they present themselves. To thrive in today’s marketplace, you have to be quick to act before competitors. That’s not always easy if you don’t have the cash flow to take a chance on new opportunities. You could spend months seeking venture capital, investment funding, or applying for a bank loan. By then, the chance to be first-to-market has passed, and you’ve lost out.
Invoice factoring gives you the cash flow to be agile and adapt to changes in the market quickly. It’s like having access to an angel investor who asks no questions, but is ready with the capital you need when you need it.
Factoring Services for Any Small Business
Factoring services are not just for struggling small businesses. Any business owner who wants to take better control of their cash flow and have money available when they need it, can use factoring services to gain an advantage.
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