Not every business will need to use invoice factoring, and it is not the right option for all businesses to consider. In fact, if a business is struggling financially and is actually in a period of decline, accounts receivable factoring may not be a realistic consideration.
For businesses that are growing, expanding or that are experiencing short term cash flow issues that are not related to poor management and financial issues, this is a simple, cost-effective and immediate solution to very common business problems. These businesses can take advantage of today’s highly competitive invoice factoring market and find just the right factor to help with their cash flow issues.
Paying Employees
For staffing services or any type of work contract, paying employees is always an issue as the customer is only paying your business on a monthly basis, and your payroll is on a weekly or bi-weekly schedule.
With invoice factoring, there is a continual flow of funds throughout the month, and you can choose the invoices you would like to factor.
Buying Materials and Equipment
With a large contract or a new contract, you may find your business is struggling for cash for the purchase of supplies, material or equipment. By using invoice factoring, you have the funds to make these capital investments without having to go to a bank for a loan or a line of credit that ends up taking time and costing money in interest payments.
Hiring New Professionals
Just like immediate funds may be needed for materials and equipment, new contracts and opportunities may mean you need to hire more professionals to complete the work.
With invoice factoring to provide a ready cash flow throughout the month, you have the ability to recruit and hire the professionals that will be instrumental in continuing to grow the business.
Avoiding Negative Credit Issues
Missing payments on equipment, failing to pay suppliers on time, and even being late with rent, utilities and other monthly bills can all mount up as bad credit issues against your business.
As your business credit rating is critical in just about every business transaction that involves financing or purchasing, or working with banks or financial institutes, keeping your credit rating as high as possible is essential.
Through invoice factoring, which does not count against a business’s profits or show on their financial statements, you can continue to ensure your business pays all suppliers and creditors on time, helping you to build that all-important credit score.
