Any B2B business that is looking for ways to boost cash flow without taking out a traditional loan may be interested in invoice factoring. When invoices are factored, you receive immediate payment from the factoring company instead of having to wait for business clients to pay. There are numerous ways that invoice factoring can contribute to better cash flow and business growth.
9 Ways to Grow Your Business with Invoice Factoring
1. Get Accepted For Funding Quickly
Applying for a business loan is a long and drawn-out process. It can be weeks or months before you even know if you’ve been approved. Then more time before you can actually obtain the money. With invoice factoring, everything moves much faster. In many cases, you can start getting paid days after applying.
2. You Don’t Need Ideal Credit
Factoring companies, unlike banks and other lending institutions, don’t base approval on your credit score when you apply. A factoring company will primarily determine their credit approval on your customers’ credit and payment history. The reason being, the factoring company purchases an invoice that your customer will be paying. This makes factoring viable for newer and smaller businesses that haven’t built up a pristine credit history.
3. Obtain Funding Without Taking on Debt
Taking on debt for your business may have a downside. Over time, debt can accumulate and harm your credit score and financial situation. Factoring is not a loan, so it doesn’t involve business debt. The factoring company makes money by taking a small fee from each transaction. With the right factoring company, you can stop factoring at any point and won’t have any long-term debt.
4. Financing Costs You Control
When you take out a traditional loan, your interest rate depends on many things, such as how long you’ve been in business, your credit history, and the type of collateral you can put up. You pay interest on the funds whether you are using them or not for the entire period of the loan. Factoring fees can be structured differently, it will generally be in your best interest to work with a factoring company that allows you to choose which invoices and customers you want and need to factor.
These factoring companies will take a small fee for each invoice they factor in exchange for providing you with cash at time of invoicing, after service has been completed. For many businesses, factoring can be a more flexible source of cash flow.
5. Credit Line that Grows with Your Business
A traditional loan will provide your business with a lump sum of money. However, once you utilize those funds and continue to grow, it can be timely and difficult to increase the amount of the loan. Invoice factoring can grow with your business. Generally, as long as you are working with customers that the factoring company can approve for a higher credit limit, factoring will allow your business to grow faster than with a traditional loan.
6. Can Help You Improve Your Business Credit
Factoring is distinct from loans, so it has no direct impact on your credit. As noted, this is a benefit in itself as you aren’t taking on additional debt. This can also help you build your credit in the long term. Improving cash flow can help you pay off any existing debts. It also helps you establish stronger relationships with vendors by paying on time and possibly making larger orders. Factoring, by strengthening your financial position, makes it easier to obtain other types of funding in the future.
7. You Decide How to Use the Money
Getting paid on a predictable schedule for invoices gives you breathing room for your business. You can use it for payroll, investing in equipment, marketing, or however you choose. Factoring allows you to use the funding for any business-related expenses. The same isn’t always true for loans, which may be limited to certain specific uses.
8. Saves You Time
When you are responsible for collecting invoices from your clients, you and your employees have to keep close track of the process. You need to pursue clients who are late with payments. With invoice factoring, you are freed from this responsibility. The factoring company takes on the role of collections. This gives you and your team more time to focus on other essential activities such as booking more business, customer service, quality control, or prospecting.
9. Helps You Acquire Reliable Customers
A factoring company will research your clients to make sure they are creditworthy. They can also help you select more reliable clients going forward. They have the resources and expertise to ascertain the credibility of potential clients. This can save you the stress of having clients who don’t pay on time, or ever.
Ready to Enjoy the Benefits of Invoice Factoring?
Invoice factoring provides many businesses with a convenient alternative to traditional financing. In some cases, it can also be used together with other types of funding. Having steady cash flow can help with business growth, giving you more stability and freeing you from being dependent on your clients’ payment schedules.
If you are interested in learning more about invoice factoring, Riviera Finance has been a leader in business financing since 1969. We work with B2B businesses in almost all industries to help them find the ideal financing solution. To learn more about our invoice factoring services, contact Riviera Finance today.
