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.
The thing that makes debt factoring work for so many businesses is its ability to turn outstanding invoices into cash. Think of your own business. All those outstanding invoices represent money owed to you. You know it’s there, you’re just waiting for it to come in. Debt factoring gives you access to that money even while you wait for the invoices to be paid.
A sole proprietorship is a business venture owned and operated by a single individual and organized under a ‘doing business as’ (DBA) arrangement. Sole proprietors do not incorporate. They don’t organize as partnerships. It is just a single person operating alone or with the help of a spouse or child.
Sole proprietors are great candidates for debt factoring simply because they have a more challenging time accessing traditional bank services. That is one of the downsides of being a sole proprietor. Bank services notwithstanding, debt factoring is a viable tool.
The typical family business is also a good candidate for debt factoring, whether that business is organized as a corporation, a limited partnership, or something else entirely. Small businesses tend to struggle with cash flow problems from time to time, which is an ideal situation for debt factoring.
Small Businesses in General
The federal government defines a small business in one of two ways: a business with annual revenues of between $1 million and $40 million or a business employing between 100 and 1,500 people. The definitions are applied based on the type of business and industry it is involved in.
Either way, the vast majority of businesses in the U.S. are considered small businesses. Small businesses, in general, utilize debt factoring to meet short-term financial needs, raise quick cash for capital expenditures, etc.
You probably wouldn’t be surprised to learn that most of our customers are small businesses. Debt factoring is a common tool and one that small businesses have been relying on for centuries.
Limited Liability Company (LLCs)
LLCs are the private equivalent of publicly traded corporations. A limited liability company may be owned by multiple partners, but the company itself is considered a person under the law. All the partners are employees of that company.
We have provided debt factoring to LLCs in a variety of industries. Debt factoring is a common way for these types of companies to maintain a handle on cash flow. And because debt factoring is based on selling a factoring company unpaid invoices, LLCs are able to leverage their debt as tangible assets to raise cash.
An Option for Most Businesses
Hopefully, you have come to realize the point we are trying to drive home here: debt factoring is an option for most businesses with short-term financial needs. Debt factoring isn’t a substitution for sizable business loans companies seek out for long-term needs. But it is great for raising fast cash in the short term.
Does your company need access to cash for short-term needs? If so, have you considered debt factoring? Debt factoring puts cash in your hands by leveraging unpaid invoices you sell to a company like ours. It is quick, easy, and can be utilized on an as-needed basis. Feel free to contact us for more information about how it all works.