Whether you’re just starting out as a business or you’ve been established for a while and pride yourself on your small, friendly service, one thing is certain – running a small business is tough. In today’s economy, ensuring you have the cashflow to deal with everything your business requires to thrive and grow can be challenging to say the least, not to mention when emergencies happen. You’ve probably heard about factoring for small businesses and perhaps you’re wondering exactly how it works? We’re here to fill you in on everything you need to know about small business factoring.

What is Factoring for Small Businesses?

Although businesses of any size can use invoice factoring, many of the companies who come to us are small and are looking to expand or are start-ups just getting going in the business world. Invoice factoring for small businesses is a quick, easy and cost-effective way to release the funds tied up in those unpaid invoices.

You know when you’re waiting around for clients to pay you that it can be a headache? Thirty, sixty or even ninety-day payment terms can all affect your business bank balance, which means you might not be able to purchase supplies or materials, pay advertising costs or even pay your staff their wages. That’s where invoice factoring comes in. Once we’ve matched you with a funder and taken care of setting everything up, up to 90% of the funds tied up in your unpaid invoices can be released to you, normally within 24 hours.

When the invoice becomes due, we’ll take care of your accounts receivable and chase clients for payment, leaving you free to focus on running and expanding your business. When the invoice is paid, the remaining funds are released to you, minus a small fee.

Is Invoice Factoring Right for Your Business?

There are a number of benefits to factoring small businesses and finding out what they are could help you decide if factoring is right for your company. They include:

  • More stable cashflow, so your business bank account won’t run dry
  • You can pay contractors and staff on time
  • You’ll have funds to order supplies or materials in bulk, saving you money
  • You can meet your commitments to HMRC and pay all your other bills
  • When you finish a project/contract you can move straight onto the next without waiting for payment
  • Your funder takes care of accounts receivable, so no more chasing late paying clients for what they owe
  • You’ll save money as you won’t need an accounts receivable team
  • Bad debtor protection can protect you in the event clients can’t or won’t pay their invoices

Of course, there are other benefits too – one of the main ones being that invoice factoring is a low-risk option for any small business.

Low Risk, High Reward for Factoring Small Businesses

Unlike a bank loan or overdraft, you don’t run the risk of spiralling debts when you opt for invoice factoring. You’ll never borrow more money than your business can afford, as factoring small businesses lends you based on the money tied up in your unpaid invoices – simple! It’s cost effective too and is a great long-term option for solving cash flow issues. If you’d rather maintain control of your accounts receivable, there’s even the option to choose invoice discounting, where you receive the same benefits as invoice factoring but stay in charge of your customer relationships, chasing clients and customers for payments when they become due.

So there it is – everything you need to know about small business factoring. It may be that you still have some questions or are wondering whether your type of business is a good fit for invoice factoring. Here at Simply Factoring Brokers, we can match you with the right invoice funder for your specific needs, and we’re happy to answer any questions you have about the process. Just give us a call today on 0330 134 2826, or drop us a note at online@simplyfactoringbrokers.co.uk.

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