If you’re struggling with cash flow because most of your business income is tied up in accounts receivable, invoice factoring could be the perfect solution. This term means that you sell the face value of an unpaid invoice to a factoring company in exchange for immediate cash. The company takes a percentage of the invoice for its fees and then collects the amount due from your customer.
Do You Need to Improve Cash Flow?
Factoring isn’t just for startup businesses. It could work if you operate a seasonal business or if you need access to immediate funds to develop new products or services. Whether your business is new or old, large or small, there’s a good change you could benefit from factoring.
What Are Your Other Options?
Some business owners assume that taking out a bank loan is their only option. However, this can come with several drawbacks even if you do meet the qualifications for approval. For example, a banker is the one to determine how much you can borrow and when you must repay it. With you choose accounts receivable financing, you’re only limited by the amount of money owed to your company. You also have no restrictions on how you can spend the cash once you receive it.
What Are the Habits of Your Customers?
If you have several customers who usually pay late and that makes it difficult to pay employees on time, factoring could be a solution to keep your workforce happy. On the other hand, you need to have at least some excellent customers to qualify to sell your invoices. That is because the factoring company uses the customer’s credit when making a lending decision and not yours.
Do You Understand the Contract?
It’s essential that you understand what you’re agreeing to when you decide to factor, including the company’s fees and what your responsibility is if your customer doesn’t pay. Flex Capital would be happy to go over the process with you so you can decide if this truly is your best option.