Though most often seen as a way for businesses to get instant cash, accounts receivable factoring has been used for a variety of other different things. If you are wondering whether accounts receivable financing is something you could use, here are reasons you can use it for.
- Help with collecting payments: Trying to get customers to pay up can get pretty frustrating. As a business-owner, you will find collecting payments one of the things that take up a significant amount of time and costs. A company in the accounts receivable financing sector has collection specialists who are good at following up with customers and make them pay up. This clears up your time and schedule for more important tasks.
- Cash flow instantly: It is usual to have to wait for anything between 30 to 90 days for a customer to pay up after you have provided a service or goods on credit. This is something that can easily create cash flow problems. When you hire a factoring company, you get instant cash that is a major percentage of your invoices amount. This can happen within one business day, and can help you in a variety of ways.
- Better growth: When you choose to work with an accounts receivable financing company, your business can be expected to see a higher rate of growth. Single-handedly trying to fund your company’s growth or taking out a loan will cause you cash flow problems. But when you hire such a company, instant cash for your receivables can help your business grow on a variety of different levels.
- If your business is new, this is a great way of getting funding: That’s right. If you have just started out with your business, trying to get a loan from a bank or financial institution is almost impossible. Since accounts receivable financing will be based on your customer’s credit history, credit scores, financial heath and payment patterns, it will be easy to get the money you need even if your business is new. It will not matter a lot how long you have been in the business.
- You incur no debt: Debts are not good for your financial status in any way. Of course they are sometimes necessary. But staying away from debts as much as possible is a good thing and something to strive for. With factoring companies, you don’t have to worry about being in debt. Factoring is not a loan you are taking. It is financing that you get when your customers have not yet paid up and you need the cash.
Factoring is something that can be useful for you, no matter how small or big your business might be, or what industry it might be based in. Make sure that you choose a company that is reputed and is actually interested in helping businesses like yours out in times of need. More and more businesses are now using factoring as a way to raise funding.