At some point, every business needs quick cash to fill in the gaps. However, traditional business lending isn’t a quick process. When you need to keep your cash flow stable, factoring might be a viable option. This type of financing, also known as invoice advancing, allows you to sell your invoices to a third-party company for a lump sum. You get your much-needed cash and the third-party company takes over accounts receivables. This option works well if your customers pay their bills reliably and have good credit. Here are seven specific benefits to consider.
- It’s Quick
The application, approval and turnaround times are fast compared to traditional lending. Depending on the agency, you could get everything set up within two weeks.
- You Don’t Need Excellent Credit
Your credit score doesn’t matter as much as your sales volume and monthly income. If you can prove that your business earns profit and that customers pay on time, agencies are likely to approve your application.
- Your Credit Score Might Improve
This type of financing is not considered debt since you’re selling your assets, not borrowing money. Therefore, it doesn’t show up on your credit report. This is beneficial if you already have high balances and are working on improving your score.
- No Long-Term Contracts
Once you sell your invoices and receive your cash, you’re done. If you don’t want to take out another advance, you don’t have to. Your relationship with the factoring agency only lasts as long as you need it to.
- Less Work for You
The third-party company manages your invoicing, reminders, payment collection and receipts, which relieves you of doing extra work. This frees up time for you to concentrate on other aspects of your business.
- You Can Improve Your Business
Since you have extra cash and don’t have to manage invoices, you can focus on expanding your business, refining your products and investing in your own success. You can also keep your business running smoothly without dipping into reserve funds. Plus, as you increase your sales and profits, you position yourself well for future lending opportunities.
- You Worry Less
Running a business is challenging, but having access to quick funds makes it a lot easier. When you’re able to invest in the things you need to build a profitable company, you feel better and sleep easy at night.
Evaluate whether invoice advances are a good option for your business by looking at your sales history and accounts receivables. Talk to a financial advisor if you need advice, and contact a factoring agency for more information about the terms and requirements.