Obtaining funds for businesses is still very difficult for most companies, even for those big shot companies with sufficient collateral. The lending institutions are extremely watchful about lending money to businesses and they ensure providing funds to companies which meet the highest ratings, can offer unblemished financial statements, have adequate collateral, have strong flow of cash and can demonstrate a consistent growth through a long span of time. However the only issue is that very few companies can meet the aforementioned requirements in reality. Then how are such entrepreneurs and business owners supposed to get funds from lenders?
An introduction to alternative business funding
If this is your situation when you can’t meet the business requirements as demanded by the lenders, you’ll require using an alternative source of funding, at least until you prepare yourself for qualifying for conventional funding. One of the alternative business solutions which have recently gained momentum is invoice factoring as it can immediately solve all sorts of cash flow shortage and can also be employed very fast.
Is this your commercial situation?
Are you into selling services or products to customers? If yes, it is most likely that you’ll have to offer them credit terms, letting your customers pay invoices in the next 4 to 8 weeks as per your contract. There are very few businesses which have required financial strength to provide various favorable terms to their customers and also witness business growth at the same time. There will be a time when extremely slow payments will have a detrimental impact on your business. Here are 3 common problems which your business may face.
- Your money is unfortunately tied down to sluggish invoices and you have very little cash to cover your expenses
- You start missing payments to vital suppliers and you even miss payroll
- You fail to make additional sales as you can’t wait for payments
If you’re a business owner who is facing all of the above mentioned problems, you’re probably the best candidate to seek help of invoice factoring as an alternative business funding option.
Invoice factoring – How does it help you?
Factoring allows you to finance all your slow-paying invoices thereby obtaining immediate working cash flow. It provides you funds to cover all your business costs ensuring you can pay off your employees and critical suppliers. Best part is that factoring lets you offer your clients with payment terms thereby offering a platform for your business to grow.
Invoice factoring – How does it work?
Most of the factoring transactions have a very simple structure where you work with a fiscal intermediary which finances your invoices and waits for payments. The 3 steps you have to go through are:
- Invoice your client
- The invoice factoring company advances funds to you
- You get payment from clients which ends the transaction
Majority of the factoring companies can fund invoices within a day or two, placing the company in a position where it’s paid off as soon as you transfer the invoice to your client.
Invoice factoring – What are the advantages that your business may reap?
A factoring solution can certainly have a number of benefits but we’ll inform you about the two most vital advantages that are worth mentioning.
- Firstly, it helps you solve working capital issues which are developed due to slow-paying invoices. Factoring provides a stable operating environment for your business.
- Secondly and more importantly, your company will be able to offer payment terms to your customers as because you will know that the terms can finance an invoice if it requires cash. This benefit allows you to concentrate on boosting the growth of your company rather than living from one invoice to another.
Do you qualify for invoice factoring?
If you earnestly want to qualify for invoice factoring, your company should do business with trustworthy and creditworthy customers or the government agencies. Remember that the invoices are collateral which finances the transaction. Hence it’s important that they’re free of liens or any possible tax obligations. At the same time you should also manage your company properly and have affordable profit margin.
So, if you think you need invoice factoring, you may check out websites like FactoringClub.com which offer information and profiles of more than 100 factoring companies. Choose the best one among them to bolster your business growth.