Increasingly, businesses now think of it is thought of as a viable alternative. It’s now not uncommon for companies to factor their invoices.
There are many advantages, butÂ there is one main benefit: Factoring provides immediate cash to companies that can’t wait 30, 60 or 90 days for clients to pay their invoices.
Factoring gives businesses cash upfrontÂ for the invoices. And now you have the operating funds to expand your business, meet payroll and cover otherÂ expenses.
There are many reasons businesses use it:
*Get working capital
*Relieve stress from no-pay and slow-pay clients
*Fill more orders
*Increase sales with flexible funding
*Take advantage of vendor discounts
*Fund payroll and taxes
*Extend credit to customers on large orders
*Buy equipment or inventory on demand
The Differences Between A Factor And A Business Loan
Factoring is not a loan.Â You don’t have to “qualify.” There isn’t any credit application and the factor won’t even look at your credit. The invoice discounter only cares about theÂ financial health of the customer paying the invoice.Â
There is no debt, and the process is usually quicker at just 24 to 48 hours than a bank loan.
How Factoring Works
It’s quite simple: You produce two invoices; one invoice is sent to send the customer and the other is sent to a factor. The factor will pay you the pre-arranged advance amount on your invoice.
The customer pays your invoice and the balance of the payment is paid directly to you, minus a pre-arranged fee.