When an excellent investment opportunity comes your way, you need the working capital necessary to seize it. Steady cash flow can help your small business avoid all types of financial hardship. While there are many financial options for improving your working capital, one of the most convenient and practical for many businesses is factoring. Learn how a factor can promote positive growth and versatile investment opportunities for your business today.
When you provide a service or sell a product to another business, you can typically plan on an invoice taking 30 or more days to be paid. Some companies operate with a 90-day window. This can leave even large companies feeling strapped for cash. A sudden investment opportunity, like a new client with a large order or a valuable piece of real estate, needs to be passed by due to low working capital.
However, with factoring, you can receive prompt payments. A factor agrees to take on your invoice and wait the necessary time to receive payment. In the meantime, they’ll pay you your portion in as little as a single day. This service typically provides you with 70% to 90% of the total invoice. Factor as many or as little of your invoices as you want, and stop using the service whenever you have the working capital you need to stabilize your business.
Because it isn’t a loan, you won’t have to worry about your credit score, interest rates or making monthly payments. You simply receive your money faster, at a small fee. Because it’s your money, you can spend it on any operating expense, inventory, purchase or new opportunity you need. Don’t wait for approval on how to spend your own capital.
Your factor will also agree to work with your customer to receive the payment. That means that late payment, difficulty with the payment or any other inconvenience isn’t felt by your company. Whether your credit score is low or you already have other debts to pay off every month, a factor doesn’t add another monthly payment to your small business or require an extensive credit check.
From a single invoice to all your accounts for the year, use factoring to leverage any amount of your income and improve your cash flow situation. This strategy works well with businesses who are facing slow seasons but can also be used to keep your emergency accounts ready for any issue.