Slow cash flow can cause real problems for small businesses. When clients are slow to pay, it can harm your cash flow and force you to take on unwanted debt. One solution is small business invoice factoring, which provides fast and consistent invoice payments at time of invoicing and frees you from having to wait for clients to pay.
What Is Invoice Factoring?
Invoice factoring is a type of financing which gets you paid at time of invoicing. You complete your service and sell unpaid invoices to a factoring company. Once you’ve sold the invoices, you collect payment promptly from the factoring company.
Invoice Factoring Advantages for Small Businesses
Small business invoice factoring provides some important advantages for small businesses.
1. Get Invoices Paid Within Days
Rather than having to wait weeks or even months to get your invoices paid by your customers. You can typically collect payment in a day or two by the invoice factoring company. This gives your cash flow an immediate boost.
2. Grow Your Business
Helps your business grow without giving up equity. With invoice factoring, you can enjoy enhanced cash flow without sacrificing equity in your business.
3. Easily Meet Business Expenses
Many businesses experience ebbs and flows which can be influenced by the economy or seasonal trends. With invoice factoring, your cash flow can be more consistent year-round, allowing you to more easily meet payroll and other business-related expenses.
4. Spend Less Time on Collections
When you factor invoices, the factoring company handles collections. This saves you and your employees time that you can devote to other tasks.
How Does Invoice Factoring Work?
Applying for small business invoice factoring is a straightforward process. The following are the steps if you factor your invoices with Riviera Finance, a leader in small business financing since 1969.
- The factoring company approves your application and sets a credit limit for your customers.
- You submit the invoices you want to factor, which may be some or all of your invoices.
- You deliver your products or services as usual.
- Once delivery is verified, you receive payment in as little as 24 hours. Depending on the terms of the service and your industry, you’ll receive anywhere from 80% to more than 95% of the invoice’s value.
- Your client pays the invoice, usually within 15-60 days, sending the payment to the factoring company.
- At this point, the factoring company will collect their fee and forward you any remaining balance.
Consider the example of a landscaping service with commercial clients. Because many of their clients pay 30 days after service is completed and invoiced, , the company applies for invoice factoring. Suppose they have 10 clients and the average fee for a job is $500. They perform their landscaping services, factor the invoices, and receive 90% of the value right away. They receive $450 x 10, which is $4,500 within 24 hours rather than having to wait a month or more for clients to pay. This gives them a significant cash flow boost that can be used for payroll, buying and maintaining equipment, and other operating expenses.
What Industries are Eligible for Invoice Factoring?
Riviera Finance serves many industries, including the following:
- Government Contractors
- Consulting
- Oil & Gas
- Staffing Firms and Temp Agencies
- Handyman and Repair Services
- Underground utilities
- Telecom
- Programmers and Web Developers
- Landscaping and Gardening Services
- Photographers and videographers
- Security guards
- Auto repair shops
- Janitorial and commercial cleaning
If your industry isn’t included in the above list, no need to worry. Riviera Finance can put together a custom invoice factoring solution for your business. The main qualification is that you provide a service and invoice other businesses.
If you want to learn more about invoice factoring, contact us online and a business representative will be in contact with you shortly.
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