According to a study in 2017, 82% of small businesses fail due to cash flow problems. There are many aspects of cash flow management, but one of the best, and easiest ways to improve cash flow is to factor your receivables. Factoring is one form of accounts receivable financing. Below you will find eight compelling reasons why you should consider financing your business’s invoices.
1. Get paid faster
You sell your invoices to an accounts receivable financing company, who pays you up-front for those invoices. You no longer wait 30, 60 or 90 days to receive the funds from those invoices, thereby increasing your cash flow and making it more predictable.
2. Access to unlimited capital
Accounts receivable financing is the only source of financing that grows proportionally with your sales, enabling you to consistently meet increasing cash flow demands. As you grow your business and invoice greater amounts, the amount you receive from factoring grows.
3. Factoring is fast and easy
Initial verification and approval doesn’t entail the long, detailed credit checks required by a typical bank loan, therefore original funding can be as quick as 48 hours. After that, ongoing funding is usually within 24 hours of invoice submission. This means you can have access to funds in as little as one day after invoicing a customer.
4. Factoring helps build business credit
Getting paid faster on your invoices improves cash flow, enabling you to meet your credit obligations in a timely manner. When you have adequate cash flow and pay your bills on time, you establish or improve your credit rating.
5. Detailed management reports
A sophisticated accounts receivable financing company will provide you with detailed reports on the status of your receivables, which helps you better manage your business and cash flow. This can also help you reduce the amount of time you spend preparing reports and allows you to focus on your business.
6. Retain your equity
Some forms of funding require you to give up a portion of the equity in your company in exchange for that funding. With accounts receivable financing, you keep control and ownership of your company.
7. No debt to repay
Factoring isn’t a loan, so you don’t incur debt when you factor your invoices, unlike business loans which add to your liabilities.
8. Help with invoicing
An accounts receivable finance company can help you with processing your invoices and billing.
While good cash flow management entails more than simply factoring your invoices, getting paid quicker certainly helps. We can help you explore options and determine if accounts receivable financing works for you and your company. Simply complete our contact form and one of our account representatives will contact your for a free no-obligation consultation.