3 Advantages Only Invoice Factoring Provides

You have a lot of choices when it comes to financing for working capital. From credit lines to asset-based loans, the issue for most small businesses is choosing the most advantageous and cost-effective product, not just accessing funds. If your company uses invoice billing to provide customers with convenient payment windows, factoring might just be your best bet.

Unlike most other resources for working capital, this one does not involve taking on new debt. It is not even a cash advance against income the way financing your receivables would be. Instead, it is the outright sale of your invoices for a discounted value. How close you get to face value depends on how good your customer payment histories are and how long you have had a relationship with a factor, but some great advantages kick in with your very first deal.

  1. Outsource Receivables and Collections

When you sell invoices to a factor, you close those lines in your ledger. The more frequently you send invoices out, the less work you need to do tracking payments and sending follow-up notices. This lets small operations streamline administrative tasks, and it lets small business owners as you focus on their core operational goals. That means customers get a better experience and you spend more time with the part of your business you know best.

  1. Normalize Cash Flow

Choosing your paydays might seem like a pipe dream to some small business owners, but it is what you get whenever you use factoring. Approval and cash distribution typically take five business days or less, so it is a speedy process from day one. As you work with a factor more, the relationship that develops will help streamline not only the costs but also the service time, so you get cash faster. Either way, knowing you can be paid in a week or less means being able to schedule your applications so you always get paid when you need the money.

  1. Transparent Pricing

Factors base their offers on the risk of nonpayment and the time they think it will take to collect. That means they are very interested in working with you to streamline your costs by grooming your client list so you only have the customers who pay on time, responsibly, and therefore keep your costs down. What other form of financing can you name where the lender goes out of the way to make sure you pay less for their services? Factoring may not be unique in that regard, but it is certainly in rare company.

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