If you run a small-to-medium-sized business, maintaining your cash flow can be a major issue – especially if you have clients who are slow to pay their bills. This can easily lead to a situation where the business is in the black on paper, but in the red in reality. All it takes is one major incident and suddenly there’s a desperate need for liquid cash, with none on-hand.
In these situations, there are usually very few choices available to quickly obtain funding. Most business would try to get a bank loan, but that’s not necessarily the best option. In many cases, working with invoice financing companies is the better deal.
How Invoice Financing Companies Can Improve Your Cashflow
Invoice financing, also called accounts receivable financing or invoice factoring, is a different way to see your outstanding invoices paid. The basic setup is quite simple: rather than getting a loan, you instead sell those invoices to the invoicing financing company. Then the debt becomes theirs to collect, while you get funds in-hand.
Obviously, you do take some hit on the value of the invoice. It’s generally 10-20%. For many businesses, though, this slight reduction in profits is still well worth it – particularly if they’re in a situation where they need cash in a hurry.
This process also offers several substantial benefits over bank loans:
- You don’t add to your outstanding debt. This isn’t a loan. This is a value-for-value exchange for your outstanding invoices, so you aren’t affecting your credit.
- You are much more likely to be approved. When you first start working with invoice financing companies, there will be some background checks to ensure your business is properly established. Past that point, however, any valid invoice is a candidate for factoring.
- There’s no “credit limit.” Again, as these are not loans, you don’t have to worry about maintaining a limited line of credit. Every outstanding invoice adds to the amount of funding you can receive. The only limit is your accounts receivable balance.
- Utilize factoring as often as you need. There are even companies who find it more cost-effective to sell all overdue invoices to a factoring company, rather than handle their own collections.
Let Camel Financial Help
So, the next time your business needs a fast funding infusion, invoice factoring may be exactly what you need. To learn more, contact Camel Financial – pioneers in invoice factoring for decades.