For every business, there are days when cash comes in and days when it doesn’t. However, with banks making it harder and harder to access credit, the situation is getting a bit more difficult. Fortunately, there is a solution available in the market and it’s called factoring, sometimes called debtor finance or invoice factoring.
Factoring is also known as invoice finance or accounts receivable funding. It is becoming popular for a range of reasons. Here are some of those reasons.
The factoring companies freight brokers process is a time saving one. You can have your funds ready in less than 48 hours (and sometimes on the same day) once your invoices get verified or approved by the debtor. The initial process can take only a few days and it’s sometimes even quicker, from the receipt of the necessary documents until you have cleared funds in your bank account. Compared to the time taken for a business loan approval, this is very quick. Often banks can take weeks and months to look at a loan application and all through that tome you have no idea whether they will assist you or not.
Factoring isn’t “debt” like lending with a traditional loan. It’s basically a way to get the money that is already owed to you. It’s already your asset and your money so you are just accelerating the payment. There are no liabilities or monthly payments. You can go to bed with a clear mind knowing that your balance sheet is going to be clean and your debtors will cover the funds advanced by the factor.
The fees for invoice factoring are relatively quite low when compared to the interest you will have to pay for business loans. Other than that, you can even get a cash advance of up to 85% of the total invoice value and the final fees can go as low as 1.5% – 3% of the invoice value. That’s a steal compared to anything else.
More time for mission critical tasks
Instead of bothering with collections, you can go out there and focus directly on your business and go your business. The factoring firm will assist with the collections but more importantly, the invoice financing facility will grow with your business. With a normal bank loan against real estate, once the LVR on your real estate is reached, no more funding will be available but debtor finance specialists assist you all the way with your business growth.