What Is Small Business Invoice Factoring?

When you are running a small business, it can be difficult to keep up with all of your expenses. If your cash flow isn’t stable, then small business invoice factoring could be the financial solution you need.

This financing option can provide your business with the money that it needs in a quick and uncomplicated way. In this post, we will look at what invoice factoring is and the benefits that it can bring to your business. We will also look at how it compares to other financing options available to small businesses.

Small Business Pain Points!

For all businesses to succeed they need to have a steady and stable cash flow. This ensures that the business can fulfil its financial obligations and plan for growth. The most common small business financial pain points include:

  • Not having a solid financial plan or planning forward.
  • Not saving enough money for contingencies or emergencies.
  • Overspending on products and lacking a budget or not sticking to it.
  • Not knowing about employee and contractor obligations.
  • Incorrect pricing.

What is Invoice Factoring?

Invoice factoring is a viable financing option that will provide your business with the cash it needs when you need it enabling you to grow and succeed. It is a facility directly linked to your sales and is a great way for small businesses to get immediate access to the money they are owed by selling their invoices at a discount. In other words, for a small fee, you sell your invoices to a factoring company to get a percentage of the funds released from the invoice upfront instead of waiting for the invoice to be paid by the recipient. The accredited funder will then collect the full amount of the invoice from your customer, releasing any residual balance, less charges back to you once paid.

The benefits of small business invoice factoring include:

  • You get cash up front, which can help you cover your expenses.
  • You don’t have to worry about waiting for your customers to pay their invoices.
  • The process is quick and easy.
  • You can use the money however you want.
  • Outsourced professional credit control.
  • There are no long-term contracts or obligations.

Invoice Factoring Compared to Traditional Finance

Small business invoice factoring has many advantages over traditional financing options available to small businesses, such as:

  • Access to cash quickly.
  • It’s an easier way to get money than traditional business loans.
  • It’s flexible – you use it when you need it.
  • You aren’t obligated to use the money for a specific purpose.
  • No long-term contracts or obligations.
  • Other assets are not needed to access invoice finance.

If you are having issues maintaining a positive cash flow and are looking for outside assistance then invoice factoring is a flexible and trusted solution that many businesses use to help them through the cash gap, taking away the financial worry of poor cash flow as well as providing valuable credit control management.

Contact us today for more information on invoice factoring.