Small business owners and startup entrepreneurs deal with a number of challenges. To keep the clients happy, a part of the sales must be done on credit, and at the same time, one must manage the working capital needs, so as to run the business efficiently. If you are in need of immediate funds, you can choose the option of turning unpaid customer invoices into fast cash with invoice factoring. In this post, we will discuss invoice factoring in detail.
Knowing invoice factoring
Also known simply as factoring or accounts receivable financing, invoice factoring is one of the oldest forms of short term financing. Basically, you sell the invoices of your debtors to a factoring service, who offers a quick short-term and immediate loan in return. The amount you get is typically lower than the amount of bills, but you will get the remaining loan as soon as the debtors pay the invoices. You can expect to get around 80% of your unpaid invoices. The factoring company will charge a fee in exchange of their services.
Well, invoice factoring is one of the best choices for small and growing businesses that are trying hard to manage their cash flow requirements. As the owner, you don’t have to lose your share of equity, and there is no need for any collateral either. Your business assets are safe, and as long as your debtors are reliable, you don’t have to worry beyond the factoring fee. With invoice factoring, you can manage the immediate fund requirements in less than a few days, and the entire process is extremely simple. Factoring companies are interested in knowing your debtors, and if they are genuine and have a long history of paying invoices on time, getting a quick loan shouldn’t take a long time.
On the flip side
Many experts argue that invoice factoring is expensive. The charges of the factoring company can be extremely high, especially if you don’t have a long credit history. To avoid this, you need to do your research and must find a factoring service that you can rely on. Ask questions related to their services, and don’t forget to seek details of their other clients. Also, the concerned service must explain all the relevant details, including the charges. You just need to make sure that there is no scope for hidden charges.
Check with a few services that offer relevant details on available and reliable factoring services!