There is a reason that many small businesses regularly include invoice factoring in their financial strategies. It is because all businesses need cash flow to fuel their growth, and invoice factoring is a powerful solution for improving cash flow. How exactly does it bring about this benefit? Here are the two primary ways in which invoice factoring improves cash flow.
Invoice factoring expedites your collectibles
A major cause of cash flow problems occurs when you are doing great business and invoicing for significant amounts, but you have to wait to receive payment on those invoices. The business is there, the work is done, but the cash hasn’t come in yet. Depending on your payment terms, you may normally have to wait for 30 or 60 days before your clients pay. With invoice factoring, you can receive that cash—or most of it at least—now! You sell your receivable invoices to the factoring company and they advance a high percentage of their value to you immediately. This immediate cash injection boosts your reserves of working capital, which you can then put to good use.
You do not raise any debt and you don’t have to worry about collections
With invoice factoring, you do not incur any debt. It is not a loan, but a sale. This means you never have to worry about repayment schedules or interest. At the same time, the factoring company assumes the responsibility of collecting the payments from the relevant clients. You don’t have to worry about spending further time and money chasing payment.
With these two key benefits, invoice factoring provides a fast and trouble-free solution to cash flow problems.
Kore Capital Corporation specializes in providing short-term capital to small businesses. For more information on our line of credit or invoice factoring solutions and how they can benefit your business, contact us today.