How factoring can help your business.

Career Development

Sep 7, 2016

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Invoice factoring is a form of alternative lending that is growing in popularity. Because it is so difficult for businesses to get a bank loan, they have resorted to methods such as factoring to help them grow.

What is factoring?

Factoring is when you sell your accounts receivables in exchange for an advance. The factor will typically advance you up to 90% of the invoice amount. When the customer pays the invoice, they will advance you the rest and subtract their fee.

How do you qualify?

Qualifying for invoice factoring is much easier than a loan. This is because it is based on your customer's credit, and not your own. It's possible to get set up within a week, and you can sometimes get cash the very same day.

Why should you use factoring?

It is a flexible product that can help grow a new business that can't get a bank loan. You can get cash in as little as 24 hours at times, so it's possible to take on new business that your cashflow wouldn't normally allow.

Who uses factoring?

Many businesses in all industries, and of all sizes use invoice factoring to help their cashflow needs.

Trucking
Construction
Staffing agencies
Healthcare

How much does factoring cost?

the main disadvantage to invoice factoring is the high costs. The rates are usually between 2-5%, so it is very expensive. But, the flexibility and ease of qualifying may make it worth it to your business.

In closing

Invoice factoring, or, accounts receivable factoring as it is sometimes know, is a flexible financial product for business. If you can't obtain normal bank loans, it may be an alternative that can help you sustain your growth.

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