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Why Your Startup Should Partner with an Invoice Factoring Company
As a startup, you face many challenges every day. One of the biggest challenges that startups typically face is managing cash flow. As a startup, you lack working capital. Rather than taking on costly business loans, here are 4 reasons why you should seek financing through an invoice factoring company.
1. You Don’t Need Extensive Financial History
Getting traditional financing through a bank is tricky for startups. Typically, banks will look into the financial history of your business to determine the rates and terms of your loan. For startup businesses, there’s typically little to no financial history—making it difficult to get affordable loans.
Invoice factoring companies don’t focus on the financial history of your business when determining the rates and terms of your financing. When you use invoice factoring, the factoring company will look into the financial standing of your clients.
The invoice factoring will advance your business an up to 96% cash advance with low rates on your outstanding invoices. They will then take on the responsibility of collecting the payment from your clients, which is why they look into their financial standing.
2. Financing Through an Invoice Factoring Company is Fast
As a startup, you typically can’t wait long to get the funds you need. You have little to no working capital to keep your business afloat when cash flow is low. By partnering with an invoice factoring company, you’ll be able to get the cash owed to your business in just 24 hours or less.
The invoice factoring company will review your invoices, check the financial standing of your clients, and promptly transfer the funds into your account. This is a major benefit for startups. You’ll be able to get paid almost instantly for your work and avoid the typical 30 to 90 day invoicing process. This allows your business to start building a strong source of working capital.
3. You Can Work with Bigger Clients
As a startup, you do not have access adequate working capital to take on large clients or orders.
Large clients or orders take more manpower, equipment, time, inventory, and other costs that you simply can’t afford. Rather than letting your poor cash flow keep you from expanding your clientele, you can start taking on large clients using spot invoice factoring.
With this service, your business will be able to factor a single invoice, allowing you to get the right amount of funding to serve larger clients and orders. With this simple factoring service, the invoice factoring company will be able to advance a percentage of the invoice with your client to ensure you have the proper funds to complete the order, without struggling financially.
4. You Won’t Have to Incur Additional Debt
Rather than borrowing money from a bank, partnering with an invoice factoring company allows you to simply get access to the funds owed to your business. With invoice factoring, your business is simply getting a cash advance for a small fee.
This is another great benefit for startups. Starting a business typically means taking on some form of debt to set up shop. With invoice factoring, you won’t have to. You can set your business up for a debt-free future, which is something that many businesses struggle with every day.