So you’ve done your research and have realized that factoring is the best option for your business – but when is the best time to take the plunge? Business owners often seek financing when they are in trouble, but with factoring, that’s not always the case.
When is the Best Time to Factor Your Outstanding Invoices?
Slow or Poor Cash Flow
Invoice factoring is designed to help business owners catch up on invoices that are overdue, due to client’s negligence. When you start to notice that your cash flow isn’t where it should be, it’s time to consider factoring your invoices. Cash flow is needed to accomplish even the most minor business ventures. You need cash to complete orders, purchase inventory, pay your employees, and much more. With a single phone call, you can start getting paid for your outstanding invoices. The factoring company will step in and purchase your invoices to grant you up to 96% of its full amount with low rates. This means that you can get paid immediately for your services – strengthening your cash flow.
In times of growth, your business will end up having to spend more cash than it is taking in – due to the invoice based nature of your work. With factoring, you can get immediate cash for your outstanding invoices, bridging the gap between your incoming and outgoing funds. In times of growth, your business needs more inventory to take on the many new requests and clients. To combat this, you may need to hire more workers. Without cash in your pocket, you can’t afford to pay your current employees, let alone add more to your staff. With invoice factoring, you will be able to get immediate cash for your outstanding invoices, which will give you a secure source of cash for payroll.
Similarly to growing businesses, starting businesses can take advantage of invoice factoring. When starting a business, there are many expenses that you face on a day to day basis. From purchasing inventory to taking on new clients, you are in constant need of working capital. Utilizing invoice factoring can help you get paid almost immediately. You will have access to the necessary cash to get orders filled, employees paid, and funds left over for growth.
Short Term Financing
Factoring your invoices is a simple short-term financing solution for businesses of any size. Selling your invoices to a factoring company for a flat fee and getting an advance of up to 96% will allow you to have the funds from your order almost immediately. This is a great solution for large orders. With non-recourse invoice factoring, you get the funds from the order immediately and at no risk to your business. This means that in the case of your client not completing payment on their large invoice, the factoring company takes on 100% of the risk – keeping your credit safe. This allows you to get financing without incurring any additional debt to your business.