Take on More Work with the Help of Invoice Factoring
Many times companies are forced to turn away business solely because they can’t afford to fulfill an order, whether it is a physical product or an actual service. This is not only unfortunate but it is also damaging financially. Unless a business can compete for and complete jobs, they can’t make money and get out of whatever financial crisis they have found themselves in. Some businesses will use bank loans to finance jobs they don’t have cash on hand to complete. With such financing quickly drying up, businesses are being forced to consider more options, one very good one being invoice factoring.
Too many businesses end up closing their doors because they are not able to get access to financing and ran out of what they perceived to be all options. . For some reason or another, either they were not aware that invoice factoring existed or didn’t know enough about this form of financing to attempt to secure it. This is too bad because just about any business which has clients with good credit (and outstanding invoices) will be able to receive monies via invoice factoring. This is great news considering just how difficult it has become to qualify for a bank loan.
Invoice financing allows businesses to almost instantly generate capital, enabling them to take on new jobs. This form of commercial financing only requires that a company have outstanding invoices from clients with good to excellent credit. If they do, a factor may be willing to purchase them at a discounted rate. The going rate is between 70% and 90% of the full value of the invoice. This money is paid in cash and can be used for whatever the business needs it for. In cases where companies need money in order to fulfill orders, this money could go towards the purchase of materials and personnel.
After the factoring company has paid for the invoices, they will then collect on them. All previously agreed upon payment arrangements will remain the same. After the factor has successfully collected payment for the invoices, they will return the monies to the company which originally owned them, minus their fee and the money they purchased the invoices for.
This is an excellent option for businesses in need of money so that they can take on more work. If a company is unable to pay for jobs that they already have or is unable to go after new business, not only might things become stagnant, but this can be very hurtful financially. A company would effectively have no way to generate income and support itself.
Because being low on capital is a reality that many businesses face, companies have to deal with it the best way they know how. In the past, this involved bank financing. This is becoming an increasingly difficult way to raise cash today and won’t ever be an option for many businesses. Invoice factoring is an alternative for these businesses, a very good one. It allows businesses to get money fast and their ability to do so is not dependent upon how long they have been in business or their credit score.