Owning and operating a small business offers many benefits, but there are certainly a large number of challenges as well that most business owners face. When it comes to managing finances, growing a business requires regular access to capital, or cash that can be put back into the business. For many business owners, the majority of the capital in the business is tied up in invoices that have been sent to customers. This can be a big obstacle for small to mid-size businesses that often work with clients and customers who follow a standard “net 45” or even “net 60” rule when it comes to paying invoices, but there are some ways that factoring companies can help.
Invoice factoring can help keep your doors open
Having a substantial amount of money tied up in your accounts receivables means that you don’t have the cash to add new products to your inventory or to pay your own operating costs. In some cases, when a business owner has too much money tied up in unpaid invoices to pay their own bills, they have to temporarily close their doors. A business should avoid closing its doors during times when it is expected to be open, as it’s an easy way to damage your reputation as a reliable business and you can even miss out on potential sales from new customers. Instead of closing your doors, invoice factoring companies provide a helpful alternative that allow you to stay on top of your day to day business, while also ensuring that your business has everything it needs to run smoothly. Factoring companies work by purchasing your invoices from your customers who pay on a slower schedule, and give you the cash in return. This process works as long as you work with customers who have a good track record in terms of their credit and paying bills on time, and it can make a huge difference in how much your business grows this year.
Invoice factoring isn’t a loan
It’s important to note that factoring your invoices isn’t a loan – instead, you are allowing the company to take over your invoices for a small fee. If you keep your business running smoothly and remain profitable, you can really make this type of financing work well for you.