Invoice factoring is one of the greatest business inventions of all time. It generates almost instant cash, it is quick and easy to setup and use, and you can turn it on and off like a personal spigot. Here are ten quick tips to get you started.
- You do not need a great credit score. You are not borrowing money, so the typical rules of getting credit do not apply. What you are doing is selling your unpaid invoices for cash in exchange for a small discount.
- If you run a small business, a startup or you are self-employed, you can use factoring to build your credit score and your business credibility.
- With a non-recourse factoring invoice agreement, you can avoid the possibility of being stuck with a bad debt.
- You will be paid for all factored invoices within about 24 hours instead of waiting for at least 30 days to see your money.
- It is quicker and easier to arrange a factoring agreement than a business loan.
- Factoring is cheaper than borrowing. You do not pay a large set-up fee, a high interest rate or any late fees, and you do not risk being fined because of something in the small print.
- You will regularize your cash flow, so you will pay your suppliers on time, and you will be able to negotiate better supplier agreements. They will see you as one of their pay-on-time customers, so they will want to keep you happy, rather than risk losing you to one of their own competitors.
- Factoring facilitates growing your business. You can factor your invoices and negotiate good deals with your suppliers, so you will be able to go after new and larger customers. When you deliver that large order to your new customer, and you get paid the next day, you can pay your supplier as soon as you agreed to.
- Factoring is flexible. You decide which of your customers and which of those customers’ invoices you will factor out, so you are always in control of your own cash flow. You can increase or decrease as you need.
- Factoring does not demand a long-term contract, a fixed commitment or advance decisions. It is your business, and you are in charge. If you take out a business loan to fund specific purchases, your lender will expect you to act accordingly. Factoring your invoices carries no such demands.
Invoice factoring keeps you in control, helps you start or grow your business, and you can make us of it as much or as little as you choose.