Whether you are a small company just starting out or have been around for decades, factoring is a financial tool that can be very useful in supporting your business growth.
What is Factoring?
Factoring is a financial product that allows businesses to sell their outstanding customer invoices for an immediate cash injection. Instead of waiting 30, 60 or 90 days to get paid by your customer, you can now control when that expected payment inflow occurs.
I am a service company with minimal assets
Whether you are selling goods or providing services, Factoring works really well across all industries. What is key in Factoring is who your customers are – the factoring provider puts more weight on your customers’ financial strength as opposed to yours.
Many companies who are service providers find it challenging to obtain a business loan due to their lack of physical assets that the loan financier would normally demand for as collateral. Factoring on the other hand, takes your customers credit strength into consideration. Hence it is a common financing option for service companies.
My business is seasonal and has fluctuating cash flow needs
Business loans by nature requires you to draw down a lump sum from the get go. If you are not able to or have no need to utilise the whole loan amount straightaway, you end up paying interest on cash that you are not using. This situation becomes more acute for businesses with seasonal sales where both cash inflow and outflow go through peaks and troughs. Ideally, such a business requires flexible cash injections at different times throughout the year. A loan however would result in the business paying interest for idle cash that is only needed in the future.
With Factoring, you only draw down funds as and when you have the cash flow need and only pay interest over the term of the invoice, typically 30, 45, 60 days. This flexibility and short cycles give business owners much more control over their cash flow, especially for seasonal or project-based businesses.
I want to be more aggressive in my sales but worry that I do not have the cash flow to support the growth
With Factoring, businesses can immediately convert their sales into cash to fund the next sale or project. There is no need to worry about the uncertainty of when sales invoices will be paid. This allows you to confidently grow your business knowing that you have the required cash flow to support your growth.
My business is on a retainer contract
If your business has a contract where payments are to be made to you on a regular and periodic basis, example weekly, monthly, or quarterly, your business can opt for contract finance. A contract finance facility allows your business to bring forward cash against future recurring revenue from on-going contracts, licenses or retainers. This again allows you to deploy cash into your business when it is needed most.
So whichever type of business you have, Factoring can help you bridge your cash flow needs. At InvoiceInterchange, we offer flexible invoice finance solutions so you can draw down funds against your outstanding customer invoices with a few clicks of a button and take confidence in your cash flow. Schedule a free consultation with one of our team to see how we can help fund your business.