Advantages of Invoice Factoring

As with many financial tools, deciding whether invoice factoring is a good fit for your company depends on your specific business operations. Many business owners love this alternative financing method. For seasonal businesses, it provides a stability that is hard to find in other loans. Large corporations use it when they need to expand. The best way to decide whether or not it’s right for you is to understand the way factoring invoices benefits your business.

1. No Collateral Required

One attractive aspect of factoring compared to traditional loans is that you don’t need any kind of collateral to get approved. You don’t need to risk business assets. Startups aren’t required to have valuable equipment to back their credit. This makes it much easier to get the working capital you need.

What is required to get started with invoice factoring? Just that — invoices. All you need are a few unpaid invoices from clients who have good credit. You can leverage these invoices to obtain an instant infusion of cash for business needs.

2. Immediate Funding

It’s frustrating sometimes to see great opportunities but not be able to act on them. Many small businesses have their hands tied because they need to wait until the end of the month to get usable working capital. That means missing out on deals and discounts throughout the month.

With factoring, this situation isn’t a problem. You can submit as many or as few unpaid invoices as you want to get immediate financing. That way you have the cash needed to buy a computer system on sale or to purchase inventory at bulk rates.

3. Debt-Free Financing

Since this type of financing leverages your own business assets, unpaid invoices, your company isn’t taking on any kind of debt. You don’t have to worry about repayment, interest rates or anything like that. That way your money goes towards your business instead of paying stacking interest.

This is also an advantage if you’re applying for other types of financing at the same time, such as a small business loan or real estate financing. Since factoring doesn’t count as debt, it doesn’t disqualify you from getting approved for other business loans.

4. Lower Costs Than Other Emergency Funding Options

A factoring company only takes a small percentage of the total value of the invoice. This is much more attractive than common hard money loans. Instead of exorbitant interest rates, you get working capital immediately at very comfortable rates.

With factoring, you’re always in control of your business. This can boost cash flow like never before. You can use financing to expand your company comfortably. This gives you complete freedom and flexibility.

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