The Various Benefits of Using Invoice Factoring

Personal Finance 5

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 benefits for the factor surround themselves around the idea that they make money. While the amount they earn varies depending on your credit worthiness and that of the client who has to pay the invoice, they will usually hold between 1% and 12% of the value of the invoice for their own fees and charges. Another benefit is that you may recommend them to other small businesses, thereby increasing their business.

Benefits to You

The benefits to you are even clearer. No longer will you have to wait until the end of the payment term before you can receive the money you need to cover your various overhead costs. And many businesses will tell you that many costumers don’t just pay as late as possible, they sometimes pay even later than that. This means that you may find yourself in a situation where you cannot pay your staff or fulfill any new orders, which is effectively the end of your business. Thanks to invoice factoring, however, you can get your hands on the money you need at a minimal cost.

You are in control in terms of how many invoices you want to factor. Whether it is just one or all of them is entirely up to you.

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