Invoice factoring can be a tremendous boom to small businesses, because your business won’t have to wait 30 days, 60 days, or even longer for an invoice to eventually be paid by your customers. This of course, keeps cash flowing, rather than tying it up in bills that may or may not even get timely attention by the businesses being billed. Plugged up cash flow can be death to a small business, because most small businesses do not have the resources to carry customers for long periods of time, so the use of factoring can be a life-saver.
The Ins & Outs of Invoice Factoring
Many companies today participate in alternative lending processes like factoring. The factoring process begins once you present some or all of your outstanding invoices to the factoring company for purchase. Then you would receive in return, somewhere between 70% and 90% of the total value of those invoices, in cash. Normally small businesses have their cash in hand within 24 to 48 hours – making this financing option a blessing, especially in a pinch.
The factoring company would then bill the customers, and it would become the responsibility of the factor to collect payment from them. When payment is made to the factor, the portion of the invoice amount, which was held back from the original purchase, is then remitted to you, after subtracting out the interest and other charges applied by the factor.
How Factoring Benefits Your Small Business
Quick Cash
Once a factoring company purchases your invoice, you can have that money usually within 24 to 48 hours – as opposed to the potential months it might take for the customer to pay you.
Your Lower Credit Score is Not an Issue
You can even sell your invoices if you don’t have a long business history, because factors don’t make decisions based on your credit-worthiness, but on how reliable your customers are.
Oh, the Freedom
Another huge advantage to factoring is that it frees up your personnel to focus on product development and other processes that grow the business, rather than on debt collection, and the maintenance of a large receivables staff.
A Healthy Cash flow is a Healthy Business
By getting cash-in-hand so quickly, you have the freedom to settle payroll, get necessary inventory to fill orders, and have the ability to fill even larger orders than you may have been able to fill in the past.
If you feel that invoice factoring could help your business thrive don’t hesitate to call (317) 569-1110 or email us (info@libertyloan.net) at Liberty Commercial Capital. We will provide you with everything you need to and we can even begin the financing process then. Your financing options don’t stop there, we have a whole list of valuable options your business might value from.