Are you in need of immediate cash right now, but your clients can’t still settle their payments to you? At present, more and more enterprises seek the help factoring invoices which is highly recognized as one great option to short-term issues in cash flows. With this, it is now possible for entrepreneurs to turn their unsettled invoices into immediate cash without much hassle in the process.
It is imperative to note that invoice factoring is not considered loan. Here, you actually sell your invoices at a lower rate to an invoice factoring firm so that the company can provide you lump sum of cash. In addition, the firm will then own your invoices and receives payments when it collects from your clients – the period typically takes place within a month or up to three months.
When to consider using factoring invoices for your business?
Invoice factoring can assuredly provide fast working capital that can assist cover a financing issue caused by customers who do not settle their payments on time or on a regular basis. Moreover, this is one great solution when business owners need fast cash flow since it is a lot easier to get approval for financing assistance. This means that you need not have a hard time dealing with the complex and lengthy process of getting funding assistance from various sources like financial institutions due to limited operating or poor personal credit history, lack of collateral for a loan and many more.
It is delighting news to know that invoice factoring firms today are generally concerned about the client’s creditworthiness and the value of the invoices that you he or she is looking to factor. Likewise, through this option, you can keep loyal clients on longer payment terms. In a nutshell, you can significantly improve your cash flow and help you expand your business.
Keep in mind that although this option can be a great help to ensure fast cash flow, it can be costly. It is essential for you to carefully watch out for some hidden fees like credit check fees, processing fee for every invoice you fund and a few overdue fees if your customer is past due on the payment term- note that this can increase the yearly percentage rate.
Additionally, there may be a possibility that you’ll lose direct control since the invoice factoring firm will be the one to collect the invoices directly- this simply conveys that it is crucial for you to ensure that it is fair and ethical when dealing with your clients.