"Within one month our revenues had jumped over 50%."

3 Reasons Why Business Factoring Can Work In Your Favour

Financial mail

Deal with your finances.

Factoring is a financial transaction in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.

Chasing receivables is one of the worst things about owning a business. Through no fault of your own, you end up running around in circles trying to collect money that is yours to begin with. One cannot begin to estimate the amount of stress it is likely to cause. Thankfully, there is a solution. Here are 3 reasons why business factoring can work in your favour.

Cash flow restricting growth of business

In order to grow your business, it is very important to have steady cash flow. This is especially true for small businesses; opportunities to expand do not come along every day and when they do, the lack of finance can be a real deal breaker. More often than not, companies grab the opportunity to grow as they come along, but their cash flow is not sufficient enough to keep up. This is where business factoring can help you out. You can pay all your attention towards growing your business and not stress out about a stuttering cash flow. Moreover, since your business is growing, you are more likely to get approved and it won’t put a strain on the long-term financial suture of the company. It also affords you one more important thing: flexibility. The market is constantly changing and a flexible cash flow is always welcome to stay on top of the fluctuations and your competitors.

Banks are of no help whatsoever

We have all seen those bank commercials on the TV where there is a lot of talk about community and every small business loan or line of credit is instantly approved. As a bonus, they even throw in a few smiling and waving employees, along with some balloons. Real life, however, is not that sweet. In a majority of the cases most banks and financial institutions are not that generous. This is especially true in light of the recent global financial crisis. In a crunch situation, when the company really need to come through and you don’t have time on your side, accounts receivable factoring saves the day. Simply sell your accounts receivable invoices and in return you get the required amount in cash, and that too generally in less than 24 hours. You don’t ever get that with bank loan applications.

Reputable customers delaying payments

If a company is facing cash problems, it isn’t necessarily the company’s fault. Quite often, companies are left holding the bag because their customers are delaying the payment owed. You go out of your way to conduct due diligence and ensure that the customer has a good rating and history, before doing business with them. So, when the customer delays the payment, why should it be you who should suffer? If your customers are credible, you can turn that to your advantage and use business factoring to retrieve a major chuck of the amount owed. It may not be the entire amount a customer owes you, but it is still better than nothing when you are in a crunch situation. Also, since you didn’t have to take a loan, you’re debt-free as well.

Accounts receivable factoring can be one of the greatest tools in your arsenal to help your business grow rapidly, without getting embroiled in debt.

About the Author

Today’s guest post is penned by Martha Stewart. She works as a business consultant and is also a serial blogger. She shares business and marketing advice through her articles. She recommends Accutrac Capital, factoring company in US to people who want to know more about the different processes involved while running a company.

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Author:Globial International Business Team

The Globial International Business Team researches, analyzes, and reports on all things related to global trade and business.

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