Account Receivable factoring can be an excellent way for your business to get the cash it needs to pay for things now. In an industry in which you are often not paid for weeks or months after rendering service, factoring allows you to sell your accounts receivable invoices to a factor to get cash up front instead of waiting for clients to pay your invoices.
However, factoring is not the right choice for every business. Here are two crucial questions that can help you decide if factoring can help your business succeed.

• Is there a gap in your cash flow? The lag time between when your employees and vendors expect to be paid and when your clients pay their invoices can create a significant strain on your cash flow. If you’re using your personal cash and credit cards to pay the bills, paying a high rate of interest on loans or getting hit with late fees on payments, factoring may be the answer. In addition to eliminating the late fees you’re paying to vendors, you may even be able to take advantage of discounts offered by vendors for quick payment.

• Do you worry about whether your customers are creditworthy? If your customer files for bankruptcy, goes out of business or simply is unable to pay for your services, you are left holding the bag. Many factors also offer credit-monitoring services, letting you know about possible issues looming for customers before they become a problem.