If you have a newly started business, you will have constant worries about how you will pay your office rent and where you will get money from for your furniture, supplies and more. But there is more to it than that as well. Before you can create something that starts to bring in revenue, you will have to get staff on board, who will need payment. You will also have to purchase the materials you need to make your product and the production facilities as well. Lastly, you have to find clients who actually want to buy your product or service. All of this costs money, something of which you are likely to be in short supply of. To make things worse, you are unlikely to already have a history of credit, which means applying for a loan or start-up funds may be incredibly difficult.
In Comes Invoice Factoring
Luckily for you, however, invoice factoring can help. This allows you to actually get to work, find new customers, pay your staff and more. Simply put, you create your product and, instead of having to wait for your customer to pay for this, you sell the invoice to a factoring company. This means that you immediately have access to funds, allowing you to once again get to work. Waiting for an invoice to be paid is not always a viable option. For instance, if you need an invoice to be paid before you can buy the materials for the next order, you may find yourself having to turn away new customers because you simply cannot fulfill their orders. Best of all, the benefits of invoice factoring are true not just for you, but also for the factor, which is the company that takes on your invoice.
Benefits to the Factor
The primary benefit for the factor revolves around profitability. While the amount they earn varies depending on your creditworthiness and that of the client responsible for paying the invoice, they typically retain between 1% and 12% of the invoice’s value as their fees and charges. Another advantage is the potential for referrals—if you have a positive experience, you may recommend their services to other small businesses, helping them grow their client base.
Benefits to You
The benefits to you are even clearer. You no longer have to wait until the end of the payment term to receive the money needed to cover your overhead costs. Many businesses struggle with delayed payments—not only do some customers wait until the last possible moment to pay, but they often go beyond the agreed-upon terms. This can put you in a difficult position, making it challenging to pay staff, fulfill new orders, or keep operations running smoothly. Fortunately, invoice factoring provides a solution by giving you access to the funds you need at a minimal cost.
Additionally, modern tools such as an invoicing app can further streamline the process, allowing you to generate, track, and submit invoices seamlessly. These apps help businesses manage their invoicing more efficiently, reducing errors and ensuring a smoother transaction process when working with a factoring company.
You remain in control of how many invoices you want to factor—whether it’s just one or all of them, the choice is entirely yours.
