Running a business is overwhelming and challenging, especially for a small business with low cash flow. When your business has low cash flow due to outstanding invoices, the best thing is to go for invoice factoring. Invoice factoring provides you with immediate cash that can help your business run as smoothly and efficiently as it should.
Before we delve into the benefits of factoring for business, let’s see what invoice factoring is all about.
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What is Invoice Factoring?
Simply put, invoice factoring involves turning outstanding invoices into cash. The process is quick and straightforward. A business owner basically sells his or her outstanding invoices to an invoice factoring company that will pay them a lump sum, which can be around 70% to 90% of the total invoice.
Invoice factoring can help your business acquire the cash it needs to keep it running efficiently. You don’t have to wait for 90 days for your clients to pay their debts. You simply contact an invoice factoring company, and you will get the cash you need within a few days.
Benefits of Invoice Factoring
Now that you have a better understanding of what invoice factoring is all about, let’s take a look at some of its benefits.
You Get Instant Cash Flow
Of course, one of the top benefits of invoice factoring is that it will give you instant cash flow. When your business needs some cash, you may have to apply for a loan. This may take weeks for the loan to get approved. Chances are that your loan may also get denied too. If you are lucky and your loan gets approved, it may take more weeks for you to get the cash. So this option generally takes time. But what if you lack the time and you need immediate cash? Well, the best option is to go for invoice factoring.
With invoice factoring, you will be able to access cash as quickly as possible. This will allow your business to keep running as smoothly as it should. So if you can’t afford to wait for weeks or months before your clients pay you or your loan to get approved, choose invoice factoring.
You Will Not Incur Any Debt
With invoice factoring, you won’t have to worry about your business incurring debts. You will not pay for generating cash. Invoice factoring is not a loan. It is the amount of money your customers will pay you in the future. An invoice factoring company can pay you up to 90% of the value on your invoices.
You Don’t Require Any Collateral
One thing you need to keep in mind is that invoice factoring doesn’t require collateral. When you apply for loans or any other source of finance, you will be required to submit collateral to secure it. This isn’t the case with invoice factoring. The invoice is what will act as collateral. So you don’t have to submit a house, piece of equipment, or any other valuable thing to act as collateral.
