Invoice factoring small business Commercial bank loan

Small business factoring has been identified as one of the most powerful tools that are presently available to entrepreneurs. Besides instantly boosting cash flow, employing the services of a factoring company to serve as an outsourced accounts receivable division, completely gets rid of the burden of processing payments.

Invoice factoring small business has in particular been identified as being key to solving cash flow problems that are common as a result of delayed payments. This is the case especially for businesses that are cost-intensive such as the service sector and the transport business to mention the least. The good news is, invoice factoring is readily accessible for startup businesses. All of this is because purchases on your invoices are directly based on your customers’ creditworthiness instead of your credit or even how long you have been in business.

The benefits of factoring companies especially for small businesses are extensive and not only limited to offsetting factoring fees. Top on the list of considerations is usually how much you can get to keep. Besides who would look forward to spending little and in turn make way much more. Simply put, for any business to survive turbulent times, running out of cash is never an option. At the same time, raising cash for struggling businesses too is usually difficult and extremely time-consuming. It is in such scenarios that small business factoring comes in to promptly avail the much needed additional cash in small manageable chunks. All of this, of course, would be done without risking or losing equity or ownership of the business.

Benefits of Small Business Factoring

As a small business owner, you will agree and support the fact that steady cash flow is key to sort out the payroll, insurance, and generally keep your business operational on a daily basis. From the above, it is clearly evident that the services of factoring companies for small business has become an extremely common financial tool which guarantees access to working capital. It gets better since, besides access to fast cash, you are also guaranteed:

  • Personalized funding which suits your preferences/needs.
  • Association with small business specialists who have vast experience handling challenges and goals similar to those likely to trouble your business.
  • A trustworthy partner with the capacity to help you overcome common operation challenges as well as financial obstacles. Someone who will also ensure factoring works out for you.
  • Dedicated managers who will care for the business by ensuring fast response ensuring there are no hurdles to jump over.

 Applying for invoice factoring

Applying for your small business factoring is by far the most suitable solution to any existing cash flow issues.  Freeing up additional working capital through invoice factoring for any small business is key to staying afloat.  This is mainly because almost immediately the funds availed can be reinvested into the running of the business operations. You will agree that this approach is far much more desirable compared to the alternative which includes chasing down customers for payment.

Why Invoice Factoring is currently Small Business Loan Alternative top choice

Small businesses have always found it challenging to acquire financing. This is mainly attributed to requirements barrier such as the need to have sizeable assets, several years of profitability and in certain instances thoroughly audited financial records, etc. unfortunately, many business owners have not opened up to the idea of exploring alternative forms of business financing simply because they do not know that alternatives exist. Many business owners lose hope of getting hold of any financing the moment they are turned away. As strange as it may sound, in most cases, the less-known alternatives have proven to work much better compared to the conventional forms of financing.

One of the biggest challenges to businesses is their accounts receivable. You will be happy to learn that invoice factoring is one extremely ideal way of maintaining a positive flow of cash. Just so you know, invoice factoring simply refers to the practice of giving away your accounts receivables at a discounted rate. In return, you receive cash and the company that bought your account receivables steps up as the collector for the invoices.

As a business person, it is strongly advised that you consider making such a move should the need arise since it guarantees you constant cash flow. For small businesses, freeing up additional capital through invoice factoring serves as a guarantee to invest in new equipment which is in turn used to sort operational costs or the payroll. In short, invoice factoring serves as a guarantee for the much-needed working capital without constantly having to worry about when your clients would clear their outstanding balances. From the above, you can clearly see that invoice factoring is the business loan alternative which provides businesses with predictable cash flow that strategically positions them for growth.

Difference between invoice factoring and commercial loans

First off, it is important to understand that invoice factoring is not a loan hence it would never feature on your balance sheet as a debt. it is a financial transaction between the business that is after capital and the factoring companies. Invoice factoring is when a company purchases all of your receivable invoices at a discount and in turn provides you with additional funds to run the business operations.

Factoring has since proven to serve as a perfect alternative to a commercial bank loan. This is mainly because it gives businesses access to quick cash to sort out urgent business needs. As a matter of fact, by adopting the use of accounts receivable factoring, all your open invoices would immediately turn into readily available cash in the bank.  This kind of funding you should know is immediate and largely driven by your customers’ demand for the goods or services that you offer.

To date, invoice factoring has served to get rid of several difficult to meet requirements which many companies have been faced with previously in order to be commercially financed. Picture this, if you can get a hold of some form of financing from the present tight banking market, what will be your way out once these funds get depleted? Well, you will be forced to wait for the invoices to be cleared. Besides the biggest problem with most conventional bank loans is the fact that there is a credit limit.

Bottom line is, you should first opt for the no loan cash-based alternative to funding. This, however, will always be based on the quality of your assets. Keep in mind each account would be evaluated individually. All in all, invoice factoring guarantees you much more flexibility compared to any bank when dealing with a considerable increase or surge in sales.