Invoice factoring for small business is a means of providing short-term cash flow while a company is attempting to collect on outstanding invoices. This type of factoring is sometimes known as invoice finance. Regardless of what you call it, it represents just one of the many financial tools your small business has at its disposal.
We offer invoice factoring in Utah. As such, we fully understand that factoring is not the right financial option for every business in every case. But when it is the right tool, it is a fantastic tool that brings a lot to the table. To illustrate that point, here are the top four reasons to consider invoice factoring for your business:
1. Simplified Approval
Although invoice factoring is sometimes described as a short-term funding tool, it is not legally a loan. When you factor invoices with us, we are not loaning money. Rather, we are purchasing those invoices from you at a discounted rate. We earn our money through a factoring fee represented as a percentage of the total value of the invoices in question.
All of this is explained to help you understand that being approved for invoice factoring is comparatively simple. You do have to supply us with some basic information, which we verify. But we look more at the creditworthiness of your customers rather than yours. Our simplified approval process means you do not jump through hoops to gain approval.
2. Faster Funding
Hand-in-hand with simplified approval is fast funding. Because our approval process is not drawn out over several months, you can get the cash you need much more quickly. This is key in the sense that invoice factoring for small business is almost always utilized to cover cash flow gaps. You do not have time to wait two or three months for funding. You need it now. Factoring gets you funded as quickly as possible.
3. No Collateral Is Required
Again, factoring is not the same thing as obtaining a business loan. It involves selling the factoring company your invoices at a discounted rate. As a result, you don’t need to put up any additional collateral. Invoice factoring is business lending secured by the invoices in question.
The implications of this are far too complicated to get into in such a simple guide. Suffice it to say that not having to put up additional collateral makes obtaining fast cash even better.
4. A Proven Financing Model
If you are at all worried about the legitimacy or wisdom of invoice factoring, know that it is a proven financing option for small business. Invoice factoring has been around a long, long time. Moreover, it is not exclusive to the U.S. You can find invoice factoring companies in the UK, Canada, and throughout Europe and Asia.
It is not clear where factoring began, but there is evidence of its use in ancient Rome. The British relied on factoring to build its empire by way of multiple trading companies that financed expeditions overseas. And of course, the original settlers that came to American soil came on expeditions that were made possible by factoring.
The truth is that invoice factoring is a centuries-old practice with positive results behind it. If it is the right financing tool for your business, it will give you fast access to cash by way of outstanding invoices. You have receivables waiting to be collected, so why not take advantage of them as a tool to manage cash flow? We can help you do just that. If you would like to know more, contact us at your earliest convenience.