Finance Your Company With Invoice Factoring
Slow paying clients are often a problem for small and mid-sized businesses. Waiting 30 to 45 days for payment after delivering products or services is common, especially when the customers are large companies. They are able to leverage their size to stretch their cash-flow in this way.
Credit agreements like this are great if the vendor can wait that long to collect. But self-financing is tough for many businesses. Obligations for utilities, rent, supplies and payroll don't disappear. Try making regular employees wait 45 days for a paycheck and you won't have to worry about making payroll for long.
Business financing easily solves the problem of waiting on payment. But with credit markets as they are, most businesses simply can't qualify for traditional types of financing. Institutional decision makers are very conservative in their business credit offers. Without significant assets, great financial statements and a solid business record, you won't get credit. Let's face it, that type of business probably wouldn't be in this position. This leaves traditional loans out of the picture for most.
There are other options, some of which are likely better anyway. Invoice factoring allows a business to leverage the invoice itself for credit. The factoring company makes an advance against the value of the invoice for 30 to 60 days, giving you the cash to make payroll, pay rent and purchase supplies. When your client makes payment, you settle the advance.
Invoice factoring is advantageous because it's easy to obtain, especially compared to other financing options. The factoring company takes the invoice as collateral. This is especially appealing for companies whose greatest asset is their great clientele. Another benefit is the dynamic nature of the credit limit. You can access more credit with more or larger invoices.
While it certainly isn't a panacea, invoice factoring may be just the thing to get your business through the difficult times of waiting for clients' payments.
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