Factoring as One of the Top Business Funding Strategies for Any Market
If you are a newly established business in your specific market selling on credit terms, then you may be in need more working capital to grow. But financing this growth is often a huge challenge, especially during the first couple of years of the life of your trade.
More than likely, you will have a cash flow shortage in your business, especially since the economic downturn. If that is the case then your company stands to benefit the most from invoice factoring. Most businesses in the business-to-business (B2B) environment that sell on credit terms—that is to say, they usually have to wait for around 30, 60 or 90 days for payment for goods or services—do not realize that they have a little-known asset that can be used as collateral.
What is it?
Debt factoring is essentially capable of bridging the gap between completing your customer’s order and receiving payment. Factoring is simply one of the best business funding strategies around these days. Factoring has been used by businesses to convert sales on credit terms for immediate cash for thousands of years. This form of funding enables a company to capitalise on the power of their outstanding debtor book—that is, the money owed to them by their customers. It is a valuable mechanism to turn a business’ invoices into immediate cash, which in turn allows them to fund their most critical business operations. In some cases, it even allows them to make payroll or buy supplies that are needed for future business operations. This is why factoring is becoming the preferred financial tool for flexible working capital.
How to get it?
Invoice factoring is, not only, easy to obtain from funders, but it only takes minimal paperwork. The funder will make the decision about working with a small to medium sized enterprise, regardless of trade or market, based on the credit-worthiness of its customers and not on the company’s financials. The qualification process takes less than a day for most. Almost any business can qualify for invoice financing if it generates sales in terms to customers with strong financial credit.
After the funder has done their due diligence, making sure that the requirements and duly completed paperwork are in order, the invoice will be paid by the factor in as little as 24 hours. Essentially, the debtors now owe the factoring company instead. The best part is, they get to keep the same payment schedule.
Who is qualified for it?
Invoice factoring services are available to all trades, markets, and industries that deliver products to commercial accounts and/or provide services. Factoring is not a loan, which means it does not constitute debt. Furthermore, factoring companies do not expect to buy all of a company’s invoices.
An example of a large market that has benefited greatly from factoring is the construction industry. Lately, there have been some wild swings in cash flow in the construction industry. Many companies are having trouble covering payroll, especially when the bigger jobs use up all the available cash. Cash resources fuel small businesses, and today’s commercial construction companies need financial resources specializing in commercial, general, and subcontractor funding so that they can grow. This is where funding from factoring companies come in handy.
Contractors will reap the benefits of factoring, including increased working capital, while at the same time preserving the goodwill of their customers. When it comes to construction factoring, funders usually recommend focus towards finding the most appropriate solution to put them in a position to reap the benefits of the finance facility and garner the working capital they need to thrive as a business.
What sets it apart?
The difference between bank funding and invoice factoring construction companies is that factoring uses your customer’s credit line as leverage, not yours. On the other hand, a bank loan is based only on your assets and your ability to pay back the loan. Rather, your growth potential is based on how creditworthy your customers are, making it virtually unlimited. The more creditworthy customers you sell to, the higher your credit line becomes.
Funders utilize the good credit of the customers who ordered the products or services to finance the contractor or vendor who otherwise could not take on the contract. The vendor prevails as they accept and are able to implement new business opportunities. The purchasing company also wins as they have been able to accommodate diversity among their vendor base.
More inTrade & Markets
Five Ways to Lower Interest Rates on Your Real Estate Mortgage
Let us share with you one very interesting tidbit about real estate mortgages that you might not know: mortgages actually do...January 12, 2021
Maisie ‘Arya Stark’ Williams Raises $2.5 Million for her New Startup
Maisie Williams’ time on Game of Thrones may have ended, but Daisie, her talent discovery app, co-founded with film producer Dom Santry, is poised for...January 11, 2021
Recruitment Trends of 2018 That Companies Need to Pay Attention To
When it comes to recruitment, talent is king. However, it is not the be all and end all of the workforce,...January 11, 2021
These Powerful Couples Are Making It Big in Tech Industry and How!
The tech industry in the US has been thriving more than ever. By providing employment to 11.5 million workers, the tech...December 27, 2020
Celebrity Parenting Hacks Revealed: Some of These are Just Brilliant – Part I
That parenting is tough work is not the best-kept secret especially in those awful early years when parents are sleep-deprived and wild-eyed every...December 27, 2020
Oprah is All-in for Revitalizing Arts in Puerto Rico with Her $2 Million Donation
Oprah Winfrey; the media mogul, philanthropist, book club connoisseur and global leader, has pledged $2 million to help in reviving cultural...December 22, 2020
Bet You Didn’t Know These Celebrities were Charged with Murder or Attempted Murder!
We have always seen celebrities as idols, some to be revered and others to be followed when they do great things....December 22, 2020
The Richest People in Cryptocurrency
Technological advancement brought cryptocurrency in waves. While not everybody is familiar with it, banks, government, and companies make use of it....December 20, 2020
A House in Tune With Nature is the Ideal Way to Live
These days, there’s nothing like living closer to nature that calms the body, eases the mind, and soothes the soul. Here...December 17, 2020