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 Better Cash Flow
With the slow economy, even some of your best customers may be taking longer to pay.The primary benefit of factoring is better cash flow. Instead of waiting 30 to 90 days for your customers to pay, factoring gives you the ability to get paid immediately. Factoring allows you to operate more like a COD (cash on delivery) business. You can do this while offering competitive terms to your customers, without any concern about how that will affect your cash flow. Even without a recession, businesses experience ups and downs. Your business may be seasonal or struggling to survive. Factoring may help. With factoring, you can gain some control over the cash flow of your business. By factoring invoices as needed, you can improve your cash flow and sleep better at night.
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Credit History
Your business may be able to qualify for factoring even if your credit rating is poor or non-existent. Even if you have experienced a bankruptcy you may still be able to qualify. That’s because the credit decision is based on the credit rating of your best customers--- not yours. The reason is--- your customer is obligated to pay the bill---not you. Your customers may be businesses that have been around for years and still have good credit scores, despite the bad economy. If your business sells to larger, creditworthy businesses or the government, you can likely qualify for factoring--- quickly and easily---regardless of your own financial standing or credit history.
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It's Not Debt
Since the credit crisis and recession, banks are more careful than ever about lending and people are afraid to borrow. For many people the recession isn't over yet. Until the economy is stronger, who wants to take on additional debt? Instead, most of us have been hunkering down and reducing our debts.
The good news is factoring doesn't create any additional debt. Factoring simply converts one of your current assets--A/R--- into a more liquid asset---CASH. Factoring frees up some of the working capital that is otherwise perpetually locked up in your accounts receivable.
In essence, factoring is a small business loan to your company. However, your customer is the one that has to pay the money back. Assuming there are no disputes, your customer is indebted for the amount you invoice them, according to the terms of the sale. Most customers pay within 30 to 60 days. Thus, typically factoring functions like a series of small business loans. Each loan liquidates automatically, whenever your customers pay the amount they owe.
There is no upper limit to the amount of credit (cash) you can get from factoring. As your sales and accounts receivable increase, more cash becomes available. Expansion of your initial credit line occurs almost automatically, without you having to go through all the hassle of applying again to get more credit. If your business grows beyond our normal capacity to service---no problem. We maintain relationships with other funding sources that enable us to seamlessly provide you with all the funding your business could ever need.
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