Working capital is one of the most crucial or important aspects that a business needs to have to run peacefully. This amount is going to help the companies to pay their bills, and to fund the growth as well as help in negotiating discounts.
Most banks now have tightened the amount they can loan to their clients. Things have become quite difficult these days as a result. While there seems to be no other option that is available to help you overcome this hurdle, there is one great option in place.
Account receivable funding is one of those options that you can choose to overcome all the financial obstacles that you are going to encounter.
What Exactly Is Invoice Factoring
For more than a decade most of the companies are happy to utilize this option when they are in dire need of funds. The best part about invoice factoring is the fact that there are plenty of options that are available now than ever. These options are quite flexible, and they are not that costly when you compare with rates in the previous years.
Fortunately, you are going to get the funds that you need from most of the factoring companies in less than 24 hours. These companies are going to follow-up with your client and ensure that they collect the entire due amount and then pay you back the remaining amount after deducting the fee.
It is entirely different from a loan. Factoring, in a nutshell, is nothing but purchasing of the invoices that are outstanding for a discount. Both the business and the factoring company are going to benefit through this model. However, most benefits are enjoyed by the company that is selling the invoices. Here is a list of five benefits a company is going to enjoy when they pick factoring services.
Access to Cash
Unfortunately, many people think that the factoring process is going to take a lot of time. They also believe that the money will come to their hands after a long wait. These are some general notions that exists across many industries. But, in reality, the factoring process is simple, easy and quick.
These days, most factoring companies are disbursing the amount to businesses in less than 24 hours on all invoices that are approved. In rare scenarios, it might take up to 48 hours. The companies need to submit all the necessary documents and receipts first so that the verification team does the essential groundwork before approving the application. This process might take anywhere between five to ten days.
Banks on the contrast can take several weeks to months to give the necessary approvals for a loan. Your company does not have to go through this phase when you pick this option.
No Debt Involved
You need to realize the fact that factoring is not a loan that you are going to take. It will not show up on the liabilities section on the balance sheet. You should recognize the fact that it is not going to be a financial burden on you as there are no monthly payments that you need to make. Your balance sheet is going to look clean as a result.
Terms Are Flexible
The contract is not going to be long-term. The best part is that there is no minimum or maximum amount you can request through the factoring programs. You can choose a plan that is apt for your need and select only those invoices that you wish to factor.
Factoring Fees Are Reasonable
Costs related to factoring invoices have reduced drastically over the years. Some factoring companies are charging businesses as low as 1.5% as their fees. Of course, the fee amount differs depending upon the industry your business is in and on several other factors.
Some of the factors that are going to affect the fees are the number of invoices, creditworthiness of the customers, advance rates and so forth. The time the customers are going to take to make the payment will also affect the fee percentage.
Relieves Your Stress
You do not have to wait long to get the payments from the customers. Usually, customers take a long time to read and process the invoices that you submit. They scrutinize the bills to ensure that everything is accurate before releasing the payments. But when you choose to factor the invoices, you can relax. You can get the money that you need immediately.
You can run your business in confidence if you pick this option.
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Community manager at Visual Contenting. Jacqueline loves to talk about social media trends, new technology and how they help businesses accelerate their marketing efforts.
