Over the course of the last decade we have seen a revolution in business funding that has changed the landscape for small businesses. One of the most exciting vehicles to emerge is invoice factoring which enables business to leverage the orders on their books to optimize cash flow. Here are a few key advantages that are available to businesses through invoice factoring.
Reduce Debt Within the Business – Historically, the only way a business could leverage their sales ledger was to present confirmed orders to their local bank and secure a loan. With this came long-term contracts, potential hidden fees and interest rates that would encumber business long term debt. Invoice factoring does away with these issues by enabling businesses to effectively sell their invoices to investors for cash flow today. The money is simply repaid once each invoice is settled, creating a short-term cycle of debt that only lasts for 30 to 90 day periods on average.
Optimize Cash Flow – Regardless of your invoice terms (30, 60 or 90 day for example), you may struggle with cash flow while you wait for payments. Rather than risk relationships with client who may be slow to pay, invoice factoring gives you options to optimize your cash flow, if needed.
Drive Organic Growth – When you borrow money, it can be difficult to secure the amount that is desirable and within your means. You don’t have this issue with factoring since you can only borrow the amount that you have earned in sales. This helps you create clarity within your business and also help you drive organic growth that is in line with demand. The good news is that you will never borrow more than you can afford to repay and improve cash flow along the way.