Every business person knows that if the growth is not managed effectively it can lead to death of a business. For example, a company can have thousands of dollars in their accounts receivables but they don’t have the cash flow needed for regular day to day expenses. This is where invoice factoring provides the necessary solution.

Factoring invoices means a business sells its unpaid invoices to a third party for a discount to receive cash immediately instead of waiting months or years to be paid once the goods or services have been taken. This helps business owners manage cash flow and meet their operational and other necessary costs on time (even if customers delay payment). Our clients never run out of cash because we offer them the opportunity to sell their invoices on nearly real time basis.

In this post we discuss how the process of invoice factoring works and the benefits of invoice funding and how it works, and outline some strategies on why it is the right financial solution for your business.

How Does Invoice Factoring Work?

A business can charge a factoring company for receivables, in invoices unsold, and claim an advance payment. The process here involves cashing out an outstanding invoice. Here’s a clearer example of how this generally goes:

1. Receipts to Customers

Your business sells products or services. Payments have to be made within a specified time bracket. Payment receipts, like payment verifications or invoices, get issued and sent to the customer. Instead of waiting for clients to pay, your business can attain immediate cash using invoice factoring.

2. Payments Receipts to Factoring Companies

Trade credit customers maintaining open accounts usually delayed payment for 30 to 90 days. Rather than waiting, you can charge the factoring company for the invoice. Your factoring company would pay you in cash and would retain approximately 70 to 90 percent of the outstanding payment.

3. Collections of Payment Direct Receipts

The factoring company, and payment collections company in the following system, is now marked responsible for receiving payment. You no longer have to worry about receiving payments from your customers as they will invariably send it to the factoring company.

4. Claiming Residual Amounts Post Deduction

After the factoring company receives the full payment from your client for an invoice, they will collate the remainder and hand it over to you barring charges of their service.

With invoice factoring, cash flow is your new best friend because you are able to unlock immediate cash value from your invoices, ensuring that your business is able to run as smoothly as possible.

The Important Benefits Of Invoice Factoring

While managing invoices can be an extremely tedious task, factoring can significantly help streamline processes for your business and even improve profitability. Here are some ways it can help you achieve unprecedented growth:

1. Cash Flow

Cash is king, and there is no better source of immediate cash than invoice factoring. You are no longer bound to the burden of waiting for client payments, and can be paid for your invoices in just a matter of days. This frees up a ton of flexibility to invest in new business deals without accumulating too many receivables, and helps meet operating expenses with ease.

2. No Assets Are Required

Invoice factoring is backed by your accounts receivable and does not require any collateral, such as property or equipment, which is usually the case for most bank loans. Because factoring does not require collateral, small businesses or start-ups that do not have enough assets to secure conventional loans are able to qualify.

3. Delegate On Client Payment Collections

With invoice factoring, the responsibility of collecting payment from clients shifts to the factoring company. They will manage the collection process, thus reducing your administrative responsibilities while allowing you to focus on the important aspects of business operations. This significantly reduces the stress and costs incurred in attempting to obtain late payments.

4. Innovative Financing Option

Factoring invoices is also flexible like other types of financing offered. Your funding increases as your business grows, as well as the cash that may be accessed through factoring which is directly tied to the value of your invoices. If you invoice more, you can receive more funding. Invoice factoring is a multifaceted solution for businesses that have varying revenue or seasonal demand.

5. Focus on Business Growth

Your business does not have to wait for payments to be made because invoice factoring gives access to immediate cash. Because of this, your business can operate normally by acquiring new customers, expanding operations, and investing in marketing without worrying so much about cash flow issues. With a steady cash flow, your business is able to grow without the stress of delayed payments.

Types of Invoice Factoring

Factoring invoices can be generally divided into two groups: recourse and non-recourse. Each option has its own advantages and disadvantages based on the needs of your business.

1. Recourse Factoring

With recourse factoring, unpaid invoices still remain your responsibility. If the factoring company fails to collect payment from your customer, then you will have to either buy back the invoice or repay the factoring company. This option comes with lower fees but places more responsibility on your business.

2. Non-Recourse Factoring

This method is more expensive, but it provides you with that extra cushion of protection. In non-recourse factoring, the factoring company takes the loss if your customer chooses to not pay the invoice. You are absolved of any unpaid invoices in this arrangement, meaning you can rest easy while your customers default on payments.

We can assist you in determining the best type non-recourse factoring or invoice factoring that is most suitable for your business needs.

Why Simply Factoring Brokers for Invoice Factoring?

We help every business obtain the factoring invoice they need, and here is the reason we are the perfect partner for your business:

We understand businesses are different from one another which is the reason for offering custom tailored invoice factoring services other than the typical business requirements. Be it as a small start-up or an established company, we ensure to help you obtain the appropriate invoice factoring solution to boost your cash flow and growth.

We partnered with many trustworthy flexible factoring companies who offer a variety of services to meet your operational demands including short-term loans and long-term sustained capital flow.

We charge a marginal fee which helps us appoint customer support representatives to each of our clients to ensure all customers receive expert guidance through the process of factoring.

We care about your time, and we know that financing matters are often time-sensitive. With our streamlined automation, requesting invoice factoring services is now easier than ever, and comes with swift approvals alongside instant access to funds.

We have introduced several cash flow services such as invoice factoring which can help clients who would benefit from improved cash flow and who are growing their business, dealing with slow paying clients, or many other herculean tasks.

We provide professional help and have a large selection of factoring services to choose from to best suit your business needs. Cash flow shouldn’t be a problem – try invoice factoring and regain control of your cash flow management.

Get in touch with us today to discuss how invoice factoring can be the right match in your steps for growth and success.