Invoice factoring can be a boon to your business if you handle it right. It is always great to have funds to handle your finances, meet expected and unexpected expenses in business and increase your working capital when a need arises. Bank loans may be great but they do not work for all. By using invoice factoring, which is a best option with the least eligibility conditions, you can manage your financial needs perfectly well.
Invoice Factoring – Quick And Lasting Solution
You cannot always predict when an urgent financial need would arise. Even if you are eligible for bank loans, the process involved for sanction of loan could be tiresome and definitely not as fast as invoice factoring. Moreover, you do not bind yourself to any long term commitment if you seek factoring firm for cushioning. You can have a comfortable arrangement where you can seek their help when a need arises. Since you get paid on your invoice, you do not suffer the hassles involved if you go for a loan. The procedure is quite simple. Once you have your invoice ready for a product sold or a service offered, you can send it across to invoice factoring firm, which, after verification pays you up to 90% of your invoice value in advance. You get the remaining amount paid after deducting a nominal fee once your customer pays your bill. This arrangement helps to improve your cash flow. Let us see how.
Immediate Funds For Urgent Needs
Many businesses offer up to 3 months credit for payment to their customers. If you fall under this category, invoice factoring will help you to have a smooth cash flow. Since you get paid by the factoring company you need not wait till your customer pays you. You can manage your expenses using the cash and you are perfectly in trouble-free zone.
Avoid Loans – And Interests Too
Borrowing for meeting your business expenses may seem to be an immediate way out of a financial crisis. However, by the end of the day, you have a loan to settle and interest to pay every month till you repay your loan. This not only adds burden to your business but also affects your cash flow as you may have to redirect some of your funds towards interest and loan repayment. In most cases, this might lead to additional needs of funds to ease out the situation. By opting for invoice factoring, you avoid taking a loan and thereby enjoy steady cash flow and the money you get paid on your finance is used purely for your business needs and not towards loan settlement.
Money saved is money gained. Since you use invoice factoring, you will be in a position to pay your suppliers on time. This in turn will help you enjoy discount benefits on your suppliers’ bills. If your suppliers’ list is long, you will end up saving a good amount on suppliers’ discounts which you can divert to meet your business expenses.
Better Control On Your Finances
Since you have funds at your disposal, you have an influence on your suppliers. You can go for a bargain as you will be paying upfront on your purchases and ask for a better deal. The amount saved in such transactions can help to add to your working capital.
With accurate planning after going through the pros and cons of availing invoice factoring, you can increase your cash flow, which is the very essence of doing a great business.