 As a rule, business owners who need financing start their financing look for a business loan or a business line of credit. In spite of the fact that business loans and lines of credit are well known products, they are very hard to get. And in fact, few business owners actually manage to get them.
In rare instances, invoice factoring may be a better and easier to get alternative. There are three conditions that can define whether factoring is a better choice than a business loan:
- Are your clients’ slow payments hurting you? Do they take up to 60 days to pay?
- Are you turning away bigger sales because you lack working capital?
- With the right financing, does your business have significant growth potential?
All positive answers to these questions point that factoring is the better alternative for you than more traditional business financing products. Invoice factoring provides you with financing based on your invoices. It removes slow payment cycles and provides you with money to pay rent, meets pay-roll and improves your business.
Since factoring is fastened to your sales potential, it does not have the accidental use limits that business loans have. The more your business grows, the more financing you qualify for. Period. This makes it an ideal product for businesses that have significant growth potential.
Factoring is very easy to use. Once you have invoiced your customers you send a copy of the invoice to the factoring company. The factoring company, in turn, advances you up to 90% of your invoice and waits to be paid by your client. Once your client pays the invoice, the transaction is settled.
In reality, by financing your invoices you remove the slow payment problem. You quicken your cash flow, enabling you to pay your obligations, take new opportunities and grow your company.
As for the cost, factoring is a very competitive product. Factoring fees range from 1.5% to 3% per month. And this makes it an affordable product. If you own a business that is growing and you need financing, be sure to consider invoice factoring.
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