Post Tagged with: "obtain working capital"

When Does Invoice Factoring Make Sense?

View of an invoice form from a man's laptop screenInvoice factoring is a financial transaction that turns your receivables into real dollars in no time. Unlike accounts receivable financing, the factoring company would buy your outstanding invoices in this deal. It may not always be suitable for all financial situations, but it’s one of the better ones in terms of value and convenience.

When should you turn to an invoice factoring firm? Here’s when it makes absolute sense:

You Have Creditworthy Customers

TAB Bank shares that one of the qualifications for online invoice factoring is customer creditworthiness. If the suppliers that owe you money have a good history of paying bills, you can get the most money because the other party would feel confident purchasing your unpaid invoices.

You Need to Expand Your Working Capital Immediately

Unlike traditional commercial loans, invoice factoring offers a speedy and straightforward process. You can receive the funds in a matter of days. The approval of business loan applications takes a while because borrowers come under scrutiny. If you need the money ASAP, you can increase your liquid assets without building an excellent credit rating first.

You Want to Use the Money Without Restrictions

You can use the invoice financing proceeds in whichever way you want. There’s no need to come up with an elaborate presentation about how you intend to spend the money. The invoice factoring company only cares about how fast your customers can pay it. Your spending choices are entirely your own business.

You Like to Avoid Debt Collection

Debt collection can strain the years of business relationships you’ve built with your suppliers. Debt collectors are notorious for relentless contact attempts, which might antagonize your customers.

On the other hand, factoring companies don’t do anything that might cause debtors to ignore their financial obligations. If they frustrate debtors, they will suffer because they would solely absorb the losses from non-payment.

Invoice factoring is a smart way to rid your company of receivable. Do your due diligence to find a reliable factoring firm you can quickly deal with.

April 17, 2018 at 4:32 pmMind of Money