How to Use Factoring for Struggling Small Businesses
When you’re running a small business, you depend on the timely payment of your invoices to sustain your cash flow. Factoring for small businesses is a useful option for companies experiencing temporary cash flow problems. These problems may arise when you have important expenses that you need to cover or vital capital expenditures that you need to make, but your income is delayed due to the 30-60-day terms of your receivables. Factoring can help you overcome these temporary problems without incurring any debt.
How does invoice factoring work?
If a company hits a dry spell in its cash flow, it may well try to solve the problem by applying for a short-term loan from a bank or other financial institution. The problem with this is that it takes time, and it reflects on your balance sheet as a debt. The easier option is to sell your invoices to a factor. Receivables factoring is an easy process. All you have to do is submit those invoices on which you are expecting payment. We will assess these invoices, as well as the credit history of your clients. On this basis, we will buy the invoices from you, advancing you between 70 and 90 percent of their value. You get an immediate cash injection (the transaction is usually processed on the same day). We then take over the collection of the invoices, following up with your clients. When we receive payment, we take our fee and then pay the balance to you.
Invoice factoring is a much easier alternative to a bank loan, and a great way to boost your cash flow in the short term. It is especially useful for small businesses who can’t afford to wait for a loan approval, or who are struggling with a poor credit history. If you would like to take advantage of this solution, come to Kore Capital. We are a business financing solutions provider that specializes in factoring for small businesses. Contact us today.