Invoice factoring is a way to make use of the company’s accounts receivables now, rather than waiting until customers remit payments.  Businesses use factoring for a number of reasons, ranging from paying debt now rather than later to using the advance payments from the factoring to fund a project.  Here are some examples of how invoice factoring helps to grow your business.

Reduce Debt

Since factoring the invoices for an accounting period means money now rather than later, there are funds available to pay creditors on or before the due dates.  This translates into avoiding late fees and other penalties that add to company debt.  

Increase Cash Flow

Obtaining most of the receivables in a lump sum means there’s money to work with now, especially in relation to day to day operating expenses.  Essentials like meeting a payroll or buying a new computer can be managed out of that cash flow, keeping operating expenses in check without using up a line of credit that is intended for funding an expansion project.

Launch a New Product

A portion of the proceeds from invoice factoring can be set aside for product development and launch.  This pay as you go approach means that when sales begin to generate on that new product, there is not a lot of expense hanging out there to gobble up the revenue stream.  As a result, the company can afford to allocate some of the profits to other ventures, such as securing investments or expanding the production facility to accommodate the growing customer demand.

Fund an Advertising Campaign

Invoice factoring provides funds today that can be funneled into publicizing the company using all sorts of media.  The funds can be utilized to buy air time on television and radio spots, design and launch online advertising in the way of banner ads or setting up splash pages, or any other advertising strategy that is likely to resonate with the target market.

Selecting the right partner for the invoice factoring is very important.  Make sure you understand how much of the face value of the invoices will be advanced, the amount that is kept as the fee for providing the funding, and how much is paid once all the invoices in the batch are settled.  Also look into the collection processes used by the partner, including the specifics for receiving payments on factored invoices and how delinquent clients are managed.