Borrowing money to fix a business’s cash flow problems is typically a temporary fix, especially if that business is growing quickly. If you get a loan, it may seem like the problems are being fixed, but it doesn’t fix the underlying cause of the cash flow problem. Invoice factoring, however, is the perfect cash flow solution because it directly addresses the cause of the problem.
Here are some reasons why factoring is a great lending alternative to use while your business is growing:
Qualifying is Easy
Even if things are going well, qualifying for bank financing, like a loan, can still be difficult for most businesses. With factoring, qualification is mostly based on your client’s credit, not yours. Factors don’t lend money, they actually purchase invoices. Factors will generally work with companies regardless of their credit history, as long as their customers pay their invoices on time.
Bank loans are secured by all your business’s assets, and sometimes by your own personal assets. Factors typically only require a first priority lien on your accounts receivable.
Factoring can be done whenever you need. You can factor all of your invoices one month, and just a few the next. If you need cash to meet payroll or an opportunity comes up, just factor some invoices instead of all of them.
There are many other benefits to using factoring to grow your business, including:
- Increase production and sales
- Meet payroll or payroll taxes
- Finance expansion without debt
- Pay off outstanding debt
- Improve credit rating with timely payments
- Improve balance sheet by increasing cash and decreasing accounts receivable
- Eliminate the need for loans or the use of credit cards to provide working capital
If you’re ready to start factoring your invoices and get your business moving, contact us today!