factoring company

Top Four Benefits of Invoice Factoring

Cash flow is the lifeblood of the business. Most small businesses stumble due to cash flow problems. Through invoice factoring company, businesses can get the money they need to take advantage of new opportunities, increase inventories and pay off their existing debts. Factoring is the process in which a company sells its account receivables or invoices to a factor. The factor advances most of the invoice amount, usually 70 to 90 percent of the invoice face value. The other remaining amount is paid after full collection of invoices from the customers and after the deduction of an invoice-financing fee. Here are the four top benefits of account receivable financing.

Quick Access to Funds

Selling invoices allows businesses to access up-front cash flow and expand their working capital. Additionally, this form of working capital is unlimited in nature, since it is determined by the sales turnover rather the value of available assets. Sufficient working capital enables a business to take advantage of emerging marketing opportunities and achieve its operational objectives.

Save Time and Money

By using invoice financing services, business owners can be able to concentrate on the core operations of their business. This is because the factor takes up the responsibilities of collecting payment for the invoices from the customers. In addition, invoice financing has a cost-reduction impact since the factor assumes all the credit control functions, such as maintenance of sales ledger for the transferred invoices. These tasks can consume a significant amount of time and resources for the business organization.

Affordable Financing Option

Financing invoices is quite affordable when compared to other methods of business financing. This is because it is not subject to high interest rates like most traditional loans. Account receivable financing also spares the business the need to borrow from other financial institutions.

Increase the Bottom Line

A business using the best invoice factoring services can increase its profits, and fund its continuous growth. This is because they can raise inventory for large orders, take advantage of early payment discounts, negotiate bulk discounts from the supplier and build their good credit history by paying their debts in time.

There are many other benefits businesses can derive by opting to factor their account receivables, such as, maintaining relationships with customers and retaining confidentiality. To choose the best factoring company, consider factors such as invoice financing fees, flexibility, location, experience, licenses and previous records. With the right account receivable financing firm, small businesses can cover their operating expenses and improve their profitability and growth.