If you have been wondering if factoring accounts receivable is right for your business, you are not alone. More and more small to mid-sized businesses are using factoring as a cost-effective way to provide a steady cash flow without having all the hassle and the long-term implications of a traditional bank loan or small business loan.
There are several common reasons why factoring accounts receivable works for business. These are not the only reasons, but they do provide insight into how business owners use this funding solution to boost their opportunities.
To Allow for Growth and Expansion
Having an opportunity to take on new business but requiring funds for inventory, supplies, employees and materials is always a problem for a small business. Having to tell a potential new contract you will need to delay the start date of the project can result in losing the contract.
By factoring accounts receivable, your business can immediately access the funds needed for the material and staff to take on the new project but without the need to take on additional debt.
To Save Money
If your business buys materials from another vendor, you are probably on 30, 60 or 90-day terms for payment. Often, with these types of B2B transactions if the buyer is able to pay immediately, the vendor will offer a reduced price or deep discount on the next order.
By having the cash on hand to pay these invoices, it is possible to save money over time or to offset the cost of the fees for the factoring service, giving you the best of both worlds.
Factoring can also be critical if you have the opportunity to take advantage of buying equipment, moving into a better business location or in hiring top staff to benefit your company. As there are no limitations or restrictions on what you do with the cash, factoring is a very beneficial option for businesses to consider.
