Small Business Factoring

Posted by Jan Ziegler on Tue, Feb 04, 2014

Small Business Factoring is an excellent tool for business owners, especially ones that are not yet qualifying for traditional bank financing. Small Business Factoring helps maintain cash flow for the general expenses of a start-up, funding for growth, and can also function as receivable management support for a company with a small staff.Cash Flow

Traditional Financing vs Small Business Factoring:

Traditional bank financing can be very difficult to obtain for a new, small, or credit challenged business. Many businesses use factoring to get started. While a bank focuses on the financial strength and history of the business owner and often times requires three years of financials, bank statements, and a history of profit, a factoring company is most concerned with the creditworthiness of the small business’s customers. This is because the factor gets paid back on invoices directly from said customer once purchased. In small business factoring, the factor will not typically require financials, tax returns, or bank statements. In fact, many factoring companies are willing to advance against a start-up company’s very first invoice(s).

Establishing your business through Small Business Factoring:

In addition to funding, Small Business Factoring provides many businesses with tools to run business effectively:

  • Customer Credit Analysis – A factoring company’s credit committee is able to identify customers for which their client’s should or should not be doing business with and establish appropriate credit limits so as to mitigate the risk of a loss.
  • Guidance with proper invoicing – Small Business Factoring companies communicate with their client’s customers, learning requirements for invoices and how to meet those requirements for fast payments.
  • Collections – Since factoring companies often handle the collections of their client’s invoices, the client doesn’t necessarily have to staff that function in house.
  • Reporting – Factoring companies often provide online reporting 24/7 to their clients. Such reports can include purchase reports, aging reports, and collection reports. 

Not only do these tools help any business run effectively but they also save business owners time and effort that can be otherwise spent on sales and building relationships with customers.

Small Business Factoring to facilitate growth:

You can use small business factoring to turn invoices into instant cash. This cash can be used to pay vendors and excellerate strong relationships whereby the vendor extends more credit, bring on new business that a business owner might otherwise have to turn away, meet growing payrolls, and hire additional sales staff who in turn can bring in more business. 

The long and short of it is that Small Business Factoring whether used as short term bridge financing or long term for ongoing cash flow and growth needs is beneficial to most businesses in almost all industries.

To learn more about how Small Business Factoring can help you, please contact me at 503-224-9963 or

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Tags: Cash Flow, Small Business Factoring, Invoice Funding