The majority of businesses get stuck financially not because they lack money but due to the fact that they cannot access their hard cash. Sometimes, clients may delay payments for up to 90 days. During this period, a company can make use of invoice factoring to keep the business afloat. We will look into all that you need to know about invoice factoring and the merits it has for your business.
What is Invoice Factoring?
Many terms can define invoice factoring. For example, you may hear some calling it “invoice financing” and others calling it “accounts receivable factoring”. All these names mean the same thing, which is invoice factoring.
Invoice factoring is the process of ‘selling’ owed invoices to a lender. Broadly speaking, it allows you to use your money before you receive it. There are more than enough benefits to make invoice factoring worthwhile for your business. We will highlight some of the merits of invoice factoring for your business.
Quick Access to Cash
One of the many reasons invoice factoring is important to your business is because it allows you to get quick approval of loans from banks when you need the money. The majority of small and medium-sized businesses have a major problem in accessing bank loans or any other form of financial assistance. However, invoice factoring makes it easy. You can process a loan within a day or two if you are using invoice factoring services. However, it is important to note that the amount of money you get as a loan is purely dependent on the sum of your outstanding invoices. Most likely, a bank will give you a loan for 90% of your outstanding invoices.
Relief from Invoice Collecting
One of the hardest tasks businesses face is collecting invoices. For a small business, this may mean employing new staff to follow up on such matters. It is clear that such a move is likely to raise the cost of operation of a business. If you can find a good company offering invoice factoring services, you will not have to follow up on your clients to get your money. You can use your money without hustling to get it. It is a relief, especially if you are dealing with clients who are notorious for not paying debts on time or at all.
Meet the Daily Customer Demand
It is easy for a small or medium-sized business to be forced to close down simply because they cannot meet the daily demands of customers. A company with outstanding invoices can fail to provide for its daily costs of operation if it does not use invoice factoring. Invoice factoring helps the company to get the money needed to keep the daily activities of the business running to meet the customer demand.
Filling Large Customer Orders
With invoice factoring, you do not have to let go of large orders. When you have a customer with a large order, you can seek money and attend to that order instead of letting that offer go simply because you do not have enough money to attend to the order. This is a benefit to both small and medium-sized businesses that are still seeking opportunities to get hold of large orders. Therefore, when such orders come, such businesses should use all the possible resources they have access to, including invoice factoring, to get hold of the order.
Easy Approval Criteria
Not only does invoice factoring give you a way of getting bank loans, but it also provides ways to get such loans the easy way. With invoice factoring, you do not need to add your personal assets as security for the loan for which you are applying. This means that you can apply for and get a loan very quickly without having to go back to your list of assets.
As discussed above, it is clear that invoice factoring is very beneficial to your business. You should consider using this option so that you can enjoy the above benefits plus many others.
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