5 Good Reasons A Company Should Factor

5 Good Reasons A Company Should Factor

Reasons Why Companies Should Use Accounts Receivable Factoring

One of the most noted benefits of factoring is the ability of a company to raise cash when a traditional loan is unattainable quickly. Factoring can benefit a company experiencing rapid growth and needs to purchase materials, meet payroll, pay vendors, and cover other operating expenses.

However, this is not the only advantage.  There are a significant number of reasons why companies should consider accounts receivable factoring.

Reasons Why Companies Should Use Accounts Receivable Factoring:

Factoring is a swift way for companies to raise money.

A factoring deal can be done in as little as 24 hours.  This can be extremely beneficial for a company that needs immediate working capital, or that is looking to expand their operations quickly. It can take a substantial amount of time applying for a loan and then hear back from them on whether or not they are willing to provide a company with the money needed.  A business does not normally have that amount of time.

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Factoring shortens the collections process

Businesses sometimes have to wait for weeks or even months before they are paid for services rendered.  During this time, they might be cash poor and may not have the funds available to grow their businesses or even pay for current operational expenses.  Accounts receivable factoring remedies late-paying clients.

Factoring allows companies to bring in money without taking on new debt

Debt can be a useful tool to build and sustain a business.  However, it can also be risky, especially for new companies.  Factoring allows companies to receive badly needed capital without relying on an expensive loan.

Factoring can be an excellent option for companies having trouble qualifying for a bank loan

Getting a business loan has always been challenging.  Today, it is even tougher because banks are holding on tighter than ever to their money.

If a company has not been in business very long or has had problems repaying loans in the past, the likelihood they will receive a bank loan is small.  In this case, a good alternative would be for a company to use factoring services.

Factoring can help companies that have no collection department or an understaffed one

For small businesses that don’t have a collection department or adequate personnel, a factoring company can provide a much-needed service. Factoring can provide them with what they need (money) to survive and expand by advancing money for their invoices and then collecting on them.  The seller will have to pay for these services, but it is well worth it for many businesses.

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