Invoice factoring is a great solution for businesses that need faster access to their accounts receivable, have seasonal ups and downs, or simply just want a loan alternative that comes along with zero interest. When you use factoring, you obtain the money you’re owed by clients almost instantly. Succeeding with invoice factoring can be done easily. If you consider these few tips before applying, your application and experience will be a breeze.
Find out if you’re a good candidate.
Some may get the impression that invoice factoring is only for startups, but businesses of every size and of every age across many industries benefit from factoring. You can be a great candidate for factoring whether you’ve been in business just a short while or over 20 years. Many businesses use factoring to achieve better cash flow. Seasonal companies use factoring as well, to make up for their off season. Another use is to free up funds so you can use the money to take on extra projects or orders, start expansion, purchase new equipment, or anything else you wouldn’t be able to afford without your accounts receivable being freed up.
Ask yourself a couple questions about your business.
Figuring out when and how factoring can benefit your business is one of the best ways to make sure the process is successful. If you don’t think you’re the right candidate, the factor probably won’t either. These questions can help you decide if factoring is the right fit for you:
- Do you have customers that usually pay late?
- Do you run into problems paying your employees because of these delayed payments?
- Do your customers typically have good credit?
- Is your business free from any legal or tax problems?
Invoice factoring might work well for you if you answered yes to any of these questions. Having customers with good credit is important because that’s one the main things a factor will look at when considering your application. At CoreFund, we give you the option to choose which customer’s invoices you want to factor. Not every single one of your customers need to have good credit, just the ones whose invoices you’re going to factor. Still not sure if factoring is right for you? When in doubt, just reach out! We’d be happy to talk to you about your options!
See how factoring measures up to your other funding options.
Unlike a loan, invoice factoring doesn’t come with any interest, doesn’t require collateral, and doesn’t require you to pay anything back to the factor. Additionally, factoring doesn’t put any restrictions on what your money is used for. A bank loan, however, might be able to dictate what that money is being spent on. For instance, if you took out a loan for new machinery, you might not be able to use that money for anything else besides that.
Understand how invoice factoring works.
To successfully use invoice factoring, it’s helpful to have a clear understanding of how it works and what’s required on your part. Factoring is a service and will require a small percentage off of your invoices as a fee. If you use factoring correctly, this fee is a small price to pay for what you can do with your now accessible accounts receivable! To learn more about how factoring works, check this page out or head on over to our FAQ. Lastly, if you’re ready to get started, apply today!