Receivables Factoring: Five Ways to Help your Business

When you’re running short on cash, what do you do? Sell hard, slash costs and run to the bank for a loan? Have you ever considered receivables factoring? Receivables factoring provides the same benefits as a traditional bank loan, plus so much more.

Working with a factoring company is a completely different experience than working with a bank. Where a bank provides funds and nothing more, a factor provides a slew of side benefits in addition to funding.

1)    Receivables Factoring Provides Cash for Expansion

Have you ever been presented with an opportunity that you simply didn’t have the resources to take advantage of? Maybe it was a job that you didn’t have the staff or equipment for. Maybe you didn’t have enough cash on hand to get the raw materials you needed.

Factoring provides immediate access to capital. When a new opportunity arises the funds will be there to take advantage of it. Unlike many types of bank financing, the funding process is quick and easy. In many cases, you’ll have cash in your accounts within 24 hours.

2)    Receivables Factoring Gives You Agility

The ability to react quickly to changes in the market is a valuable skill. Receivables factoring provides the funds to adapt your products and services to meet customer demand and keep up with trends in your industry.

When your business has adequate funding, you move out of survival mode. Your thoughts shift from just trying to make payroll this week to thinking about how to serve your customer base better. Factoring isn’t just about giving you room to breathe financially; it’s about freeing your mind to focus on the things that make your business bigger and stronger.

3)    Receivables Factoring Gets You Through Slow Periods

All businesses face slower periods throughout the year, even if you aren’t in a seasonal industry. You can always scale back expenses when sales slow, but there are certain fixed costs you can’t avoid. Receivables financing provides a buffer for when cash inflows don’t match well with cash outflows.

Having that buffer means that you can still make payroll, cover important payables and keep vendors on good terms even if collections are a little slow.

4)     Extend Terms to your Customers With Confidence

Many small businesses offer terms to their customers on a hope and a prayer. It’s not that they don’t realize that there’s risk in offering terms, it’s just that they don’t have the resources to properly vet each and every customer.

Since factoring companies have a strong interest in your customers’ ability to pay, they will do their own due diligence on your customer base. A factor provides tremendous insight into the credit quality of your customers. Armed with this information, you will easily know which customers will pay and which ones won’t.

5)    Receivables Factoring Saves You Time

As a business owner, you have far too much on your plate. You’re doing everything you can to grow a healthy, thriving business. The last thing you want to deal with is collections. Collections are draining on your time and your energy. When an invoice starts aging out you have to spend the time to track it down or you have to take one of your employees off of a task and have them start making calls.

Factoring companies rely on your customer to pay the invoices you have assigned to them. That means that they don’t want to see invoices going unpaid. Most factors have a team dedicated to following-up on past due invoices. The time and money the factor spends pursuing past due invoices is time and money that doesn’t come out of your pocket.

Factoring is More Than Financing

The five benefits above really just scratch the surface of what factoring is all about. It’s much more than simple funding. It’s a tool that you can use to maintain and grow and strong successful business.

Want a little more information about accounts receivable factoring? Download Accounts Receivable Loans: What Are The Options? This FREE Tip Sheet will detail how accounts receivable loans offer a reliable and accessible source of funding for your business.

Ready to take charge of your cash flow today? Call 888.833.2286 to speak to a Cash Flow Consultant now!