Whether you call it debt factoring, invoice factoring, or even invoice finance, the practice of selling invoices to a factoring company to raise quick cash has been utilized by business owners for centuries. It remains a popular financing option because it just works. If you are not sure how it works, this post should answer most of your questions.
Financing business needs can be a source of fear and anxiety. After all, taking on yet another financial obligation means adding risk to what your business is already facing. But we are firm believers in the idea that fear should not keep you from exploring every option. It certainly shouldn’t keep you from learning all the details of invoice financing.
There is one fundamental business truth every entrepreneur knows intimately: customers are everything. Without customers, there is no business. There are no sales to make, revenues to collect, or profits to reinvest in the business. This is why it is so important to foster strong relationships with customers.
We are all too familiar with slow payers in our industry. Slow payers are a normal part of invoice factoring. As a small business owner, you have your own experience with slow payers. We would encourage you to stay on top of them. Otherwise, slow payers can become bad payers. Some of them might eventually turn into non-payers.
Invoice finance is a business funding tool that could be used by literally any kind of company. It is not limited to certain industries. That being said, it has been our experience that some industries use it more frequently than others. Why? Perhaps it is the nature of what they do. This post will discuss a few examples that illustrate what businesses can benefit the most from invoice finance.
We can say with confidence that debt factoring is a legitimate and workable funding tool plenty of small businesses benefit from. But we also need to admit it is not right for everyone. Businesses must weigh the pros and cons. Our experience has been that the pros outweigh the cons more often than not.
From a strictly literal point of view, unpaid invoices are documents representing debt. Your company issues an invoice to establish the fact that one of your customers owes you money. It is pretty straightforward if you and your management team think solely in terms of an invoice’s literal meaning. But could it be that unpaid invoices represent more than just money owed?
The average American utilizes a range of financing tools. Between mortgages, car loans, credit cards, etc. we know enough to understand that a single financing tool isn’t appropriate for every need. Guess what? It is no different for business. Different financing needs require different tools. Just like individuals, businesses have both short- and long-term financial needs. Some of their financing priorities are more important than others. In order to keep things rolling along nicely, businesses need access to a wide variety of financing tools. What’s more, they need that access on an ongoing basis. Here are the 5 key financing tools we believe every business should have regular access to: 1. Invoice Factoring Let us start with invoice factoring. It is our specialty here at Thales Financial. Invoice factoring is a simple, easy way to quickly raise cash for short-term needs. You sell your invoices to a factoring company at face value. You get a certain amount of the cash up front and the remainder when the invoices are paid. The factoring company charges a fee for their service. Invoice factoring is ideal for short-term financial needs. It is ideal for raising cash quickly. A lot of our clients rely on it to maintain positive cash flow during seasonal downturns. 2. Small Business Loans Small business loans should always be in the tool box. They are useful for large capital expenditures, funding growth and expansion, research and development, and more. Businesses can apply for loans through most retail banks. Private lenders also make small business loans under the right conditions. The only caveat here is that a small business loan represents a long-term commitment. It is probably not the best choice for short-term needs. 3. Bootstrapping Bootstrapping, which is essentially the practice of business owners funding their company’s financial needs through their own resources, is usually thought of in terms of startups. For example, an entrepreneur might leverage a home equity loan and all his credit cards to get a business off the ground. The fact is that bootstrapping is not just a tool for startups. Even well-established small businesses can benefit from the practice. Like invoice factoring, bootstrapping is a way to raise cash quickly. More importantly, it is a way to raise cash without having to open another line of credit. 4. Equity Investment Equity investment involves pitching investors to infuse cash into a business in exchange for a share of ownership or a percentage of company profits. Although equity investments are rarely used by most small businesses, they should still be on the table. An equity investment could mean the difference between being able to pursue an aggressive growth strategy and having to put off growth because a company doesn’t have the financial resources to move forward. 5. Asset Financing Last but not least is asset financing. In an asset financing scenario, a company leverages existing assets to raise funds. It might lease equipment it is not currently using. It might lease empty warehouse space or sell older vehicles. Asset financing takes advantage of existing liquidity. It puts some of the company’s assets to work as a financing tool. Having access to as many financing tools as possible is wise. Each scenario calls for something slightly different. So the more tools a company has, the more opportunities there are to reach established financial goals. Here at Thales Financial, our specialty is invoice factoring. We invite you to learn more about what is arguably one of the oldest forms of business financing in the world. Companies still utilize it today because it works.
If there is one thing every business owner knows, it is just how critical cash flow is to maintaining daily operations. A lack of sufficient cash flow isn’t just a minor inconvenience; it is actually a serious problem that often leads to more problems down the road. That’s why so many business experts spend so much time trying to teach business owners how to maintain cash flow.
How much do you know about invoice finance? It has been our experience that many small business owners have never even heard of it, let alone understand it. That’s fine except for the fact that there are a lot of myths about invoice finance floating around out there. These myths unnecessarily dissuade businesses from taking advantage of one of the most trusted forms of business financing ever developed.
Every business needs to stock the equipment and supplies necessary to run daily operations. Even here at Thales Financial, where invoice financing is our specialty, we need to stock certain things. We need computer equipment and office supplies. We need software. We could be shut down if we didn’t pay attention to stocking what we need to keep on hand.
Here at Thales Financial, the service we provide is known by many different names. It is called invoice factoring and invoice finance. It is also called debt factoring. For the purposes of this post, we will use that last term. We will discuss the types of businesses that utilize debt factoring as a way to raise cash quickly and efficiently.