Invoice factoring is a type of accounts receivable financing that converts outstanding invoices into immediate cash for your small business. There are many different types of invoice factoring, from small business factoring to trucking factoring services. Before you determine whether or not your business could benefit from factoring, it’s important to know the potential benefits to your business. Here are just a few pros and cons to consider when determining whether invoice factoring is right for your business.
1. Immediate cash flow to your business
The main goal of invoice factoring services is to provide immediate cash and income for your business. Nearly 60 percent of invoices are paid late, and without the proper cash flow, your business can seriously suffer to the point of closure. In fact, according to a U.S. Bank study, 82 percent of businesses that fail do so because of cash flow problems. Invoice funding companies can help you avoid falling behind on your expenses by paying you for the work you’ve already completed.
2. More than just a financial solution
Unlike other financing options, invoice factoring provides more than just financial relief. When you work with a factoring company, you also get a team of professionals that provide additional services that support your business. Some of these include: invoicing and collections services, free credit checks, reporting tools and online customer portals with 24/7 access.
So when considering a working capital solution, remember to look at more than just the fees. You need to weigh the potential savings of time and money that working with an invoice factoring company can provide you with their suite of back office services.
3. Flexible cash flow solution
For many businesses, cash flow problems can be a short-term issue. Invoice factoring can help bridge the gaps caused by seasonal lulls or other unforeseen changes in your income.
Most invoice factoring companies offer different programs with different terms and contract lengths depending on your business’ needs. You can go month-to-month or sign up for a full year; some programs even let you pick which invoices you want to factor.
And because invoice factoring is not a loan, you’re not saddled with debt like you would incur with a line of credit.
Consider invoice factoring for your working capital needs
There are no shortage of small business funding options available to companies looking to boost their cash flow. Triumph Business Capital works with thousands of businesses every day by providing the funding and back office support they need to maintain and grow their businesses.
Ultimately, considering these pros and cons is the best way to determine whether or not invoice factoring is right for your business. For more information about invoice factoring services, contact Triumph Business Capital.