Many businesses depend on a swift turnaround for their receivables in order to continue operations. The challenge for growing companies is that their invoices are often not paid within a swift turnaround time.
And they must then wait for payment to be received from their client. It’s for this reason that many are now turning to companies offering receivables factoring services.
Receivables factoring involves sending invoices to a third-party funding provider, who then takes on the amount and pays it directly within a shorter turnaround time than the invoice would normally have been paid. In this latest post, we’ll highlight the benefits of factoring receivables.
1. Doesn’t Require Collateral
One of the most important benefits of factoring receivables is that the process doesn’t require the company to offset the loan cost by providing collateral. The loan can be made without the company having to provide any additional assurances other than the signing over the unpaid invoice to the factoring firm.
2. Higher Cash Advances
When trying to get a loan from a lender, the lending institution will probably only pay a small portion of the invoice in advance. Factoring companies specialize in providing higher cash advances to their clients. This means that as much as 80% of the total invoice cost can be paid directly by the factoring company. This can then help the organization make use of the loan quickly and reduce immediate cashflow challenges.
3. Ideal for Growth Generation
Small companies often find themselves in the position where operators must wait for payment of invoices before they begin on new initiatives. This can be frustrating to a company leader when short-term opportunities for growth arise. Having access to a factoring company can ensure that cash is available for all growth initiatives and that the company can grow quickly based on the immediate availability of funding.
4. Saves Times
Time is of the essence for growing companies intent on making headway within their industries. The marketplace is fast paced and those that don’t have the available capital immediately are often left behind. It’s why it’s now so important to work with qualified factoring companies to achieve access to the required capital. The company can help save time in reviewing invoices and communicating with client account managers. They can also save time in processing invoices and managing accounting processes for the company.
5. Professional Collections
Another clear benefit of having a factoring receivables firm take on the process for the business is the professional collections services offered by the factoring company. The company can communicate with invoiced clients throughout the process and take over the client’s accounting procedures. This helps the growing firm allocate more funding to other urgent areas of their organization rather than spending time tracking down accounting staff, making sure invoices are paid and reviewing each invoice carefully to reconcile accounts.
6. No Debt
Debt can be a great tool for many companies but for some small businesses it can create a compiling financial issue that grows over time and eventually causes the break down of the firm. Factoring receivables processes allows the client company to achieve funding for their invoices without having to go into debt or enter into difficult financial arrangements with a lending firm.
The process can save companies thousands of dollars in interest fees and ensure they have a clean slate when they wish to enter into loan agreements in the future. Consider the value of factoring receivables for your business. To learn more on the benefits this service provides, call a specialist in your local area today. It’s the ideal tool for the growing small business.