Running a small business can cause many headaches with the most substantial being the need to manage cash flow and finding ways to introduce funding into your business. You may have heard about factoring as a way of ensuring that your invoices are paid quickly, and this may be one of the best ways to provide funding for small businesses.
Comparing the Interest Rates for Loans
By working closely with a professional company whose business operates as a factoring company, you will pay a fee which is deducted from the customer’s invoice before you receive the remainder of the funds. When you are considering funding for small businesses, it may be easier to pay this fee than to arrange a bank loan or credit card advance whether fees will be substantially higher and over a longer term.
One great advantage of using factoring as funding for small businesses is that the factoring company is not worried so much about your creditworthiness, but about the ability of your customer to pay the invoice. Where it is certain that the factoring company will receive the funds, they are more likely to be able to complete the deal for you, whatever your credit history.
As a small business, it may be difficult or impossible for you to raise funding from other sources. There are bound to be times when your cash flow is either difficult or unmanageable because larger companies tend to prefer terms that are 60 or 90 days after the expected payment date, whereas your company may need to pay in advance for supplies because you are small, perhaps new, or do not have the credit worthiness to be able to grant a delay in payments.
You can choose when you work with a factoring company. You do not have to select every invoice to be applied under the factoring arrangement. You can pick and choose which invoices will help you provide the necessary cash flow for your organization to leave you in control of your business and its progress.