Any company which is experiencing tight cash flow or gaps in cash flow should consider selling their invoices to alternative lenders known as factors. In exchange for selling some or all of your invoices to the factor, you would receive immediate cash somewhere in the neighborhood of 80% of the face value of your invoices. Once customers pay the factoring company for their billed invoice amounts, the factor would then remit the remaining 20% to your business, after its factoring fee gets subtracted.

Advantages of Invoice Factoring

It’s very advantageous for companies to engage in invoice factoring because they no longer have to wait 30 or 60 days for customers to pay off invoices. Instead, they receive cash immediately from the factoring company, and it then becomes the responsibility of the factoring company to collect on the invoices.

It’s also very useful for companies with a very limited business history to make use of invoice factoring because they simply wouldn’t be eligible for receiving any kind of bank loan. If your company has a poor business credit history, invoice factoring might still be a good option for you, because your business credit history doesn’t count heavily for approval. It’s much more important to a factor that your customers pay their invoices on time since that represents the real risk to the factor.

Another way that invoice factoring can be very beneficial to a small business is that it can result in far less time being devoted to making calls to customers, or sending out late notices about invoices. In effect, employees involved with collections can be re-positioned to carry out more valuable business functions, or they may be completely unnecessary.

For all these reasons, a number of companies are finding that invoice factoring can be a godsend to them and can provide them with a source of income they never had before.

Considering invoice factoring for your small business? 

If you’ve been considering invoice factoring as a means of generating cash quickly, we may be able to assist you in your efforts. Contact us at Simplicity Capital Finance, so we can explore some ways that invoice factoring can be set up for your company.