Most huge commercial sales payments take place for a period of 30 to 60 days. This is the duration you give out to the clients to clear all the unpaid invoices. While this is viable for huge and already established business, small scale entities can get hurt by these paying conditions. With piling up of bills, unpaid employees, and other expenses, a business is always at a risk of collapse. However, there are different ways of solving such a scenario, among them include loans and lines of credit. These two can be a challenge for the growing entities as they require substantial proof of cash flow. Invoice factoring is the only viable option left to finance the expenses and sustain the cash flow. It is an option that allows companies to monetize the unpaid invoices into immediate funds and have the ability to service its operations.
6 Ways to Use Invoice Factoring to Boost Cash Flow
Act as A Continuous Source of Working Capital
While conventional lending institutions focus on the business balance sheet prior their financing process, invoice factoring companies are interested in the sales. This means the more sales a business has; the more working capital becomes available from the factoring entities. Working capital and fluid cash are also likely to increase leading to a healthier business. The continuous money injection will also allow the business to invest and expand more which leads to higher sales.
2 Access Funds without Debts
When a business has run out cash, the first things the owner thinks about is obtaining a loan. While loans may offer various solutions, they still come with long-term debt burden for the business. Bank loans will usually get carried forward for years thus an extra burden. On the other hand, factoring is completely different and better since it offers money access solution within a short timeframe though under quick repayment terms.
3 Make Payments When Invoices are settled.
There is no greater threat to cash flow than fixed repayment terms. It means you have to keep paying up even when short of money. Invoice factoring on the other hand allows you to pay only after the original invoice get settled. Therefore, there is no fixed repayments terms, meaning a more fluid and better cash flow for a business.
4 Invoice Factoring Allow you to Confidently Take on Big Projects
Lucrative clients can take a new business to a whole new level in a short period of time. However, such projects will carry significant upfront costs. The payment for these costs will often take 60 days, leaving the business in precarious situation for 2 months. This explains why most small to medium enterprises are repelled away from taking on huge clients. With invoice factoring, these fears are eradicated since factoring companies will take the 2 months burden allowing the business to carry on smoothly. In this case, you can take a high-end clientele, finish the project, get paid and boost the enterprise overall cash flow. Fears of unpaid bills, wages and expenses instantly become a past worry.
5. Have Choice on the Money you need.
Modern factoring companies will allow businesses to choose on how much cash they want to take out through invoice factoring. In the past years, business could not partially sell their unpaid invoices, but today they have the final decision to either sell it completely or partially. This means you do not necessarily have to lose the entire 5% or 10% of an entire contract. In the long run, the business will be flexible to access cash depending on their credit needs and urgencies.
6 Apply for The Cash Flow Boost In seconds
Unlike loans where a business owner has to go through a tedious long process for an application, with invoice factoring you do not have to leave the office to access the cash. You can solve the cash flow issues within the business by just visiting factoring company online software and filling for a cash injection. It involves heading the company software, flagging for the unpaid invoices, making an application, and receive the financing. No paperwork or long procedures. Just a computer or mobile application and your finance problems are solved. This does not only save resources and time but also assist businesses to pay up their expenses, wages and avoid late payment penalties. Therefore, next time you are in need of quick cash, it is better to consider going for the invoice factoring company.