Business Financing - Should You Opt For Invoice Factoring Or Not?

Short answer, yes

Short answer, yes. Provided that your company meets certain criteria.

Invoice factoring has been gaining popularity as a tool to finance growing businesses. It is a solution that accelerates payments from slow paying clients, freeing up cash flow and allowing companies to grow. Business owners can now feel more confident thanks to factoring, as they no longer have to play the waiting game and cringe at the possibility of delaying payroll or watching the business go stagnant.

But once again, not everybody can benefit from factoring. There are certain conditions that need to be met if you want to use factoring for your business.

It must be established and have commercial or government (not consumer) sales

Profit margins must be no less than 12 percent.

There must be some evidence it is indeed taking your clients too long to pay up.

Provided your business meets the above criteria, then factoring financing would indeed be a worthy business financing solution. It may not be as inexpensive as a business loan, but certainly will be significantly more flexible and easier to obtain.

Factoring will help you if.

You are turning away orders because you lack the cash flow

If you are missing payments such as rent and payroll because your cash cannot quite cover it.

There really isn't much to a factoring transaction. Once you invoice your client, you sell your invoice to the factor, who advances you up to 85% (on average) for your invoice. In the event of disputes or questions, the remaining percentage is held as a security. As the factoring company waits to get their money, you would get your funds within 24 hours. After payment is completed by the client, this would be the time when you would receive the 15% rebate, less the factor's fee.

Factoring costs are not the same across the board, as credit worthiness, industry nature and payment cycles, among others, all can influence this number. Generally speaking, factoring will cost 1.5% to 3.5% per month. To simplify things and make the option more feasible, many factors have started spacing their pricing into ten-day increments. So a factor that charges 2.7% per month, would actually charge you 0.9% for every ten days the invoice is outstanding.

To summarize, invoice factoring, provided you meet the criteria discussed above, is a feasible and still affordable solution to many financial concerns. Qualifying for invoice factoring is very easy, the biggest requirement is that you do business with credit worthy commercial or government clients.

by: Katharine Benjamin

POST COMMENT

How To Make Your Home Business Thrive Easy Steps To Start Business Online Better To Hire Professional Sharepoint Consultant For Businesses Clean And Comfortable Accommodation Is High On The List For London Business Visitors Discussion On Hotel Booking Software For Your Accommodation Business Benefit Yoga Products - A Wholesale Business Segment How Do You Decide Which It Support Company Is Right For Your Business? How To Cut Your Home Or Even Business Gas Bill My Around 10 % Each Month Small Businesses Can Use It Support Is Your Business Getting All It Can From Social Media? Business Gifts Are Effective Tools To Enhance Your Products The Importance Of High-quality Business Marketing Dvds Call Center Software- Key Of Your Business