How Factoring and Invoice Finance can help your Business

It goes by a few different names — invoice financing, accounts receivables financing, business factoring, or just factoring — but what factoring services do is provide a much-needed injection of cash for business owners in a financial pinch. While loans and lines of credit can be difficult for some businesses to obtain, invoice financing is an option available to just about any business that invoices their customers for goods or services provided.

While factors, or companies that provide factoring services, are far from charities, they do provide an affordable alternative to costly merchant cash advances, and still provide the same end-result services as credit card cash advances do — fast access to funding for your business.

Now, while invoice financing does provide quick access to money for your business, that is not the only benefit of using these funding services. Because of the way that invoice financing works, namely, that you essentially ‘sell’ your unpaid invoices to a factoring company, you can alleviate the headaches and employee payroll associated with collecting on, and managing, your unpaid invoices. In fact, some business owners prefer to outsource their accounts receivables management through factors. While factoring companies do charge a fee, or a discount rate, for each invoice that they process and collect on, at an average of 3%-5% per invoice, for some business owners, these small costs are well-worth the investment for accounting purposes alone.

Invoice financing is a good option for business owners who need cash quickly, and for those who want to outsource their invoice-collection tasks. While factoring certainly is not a no-cost business service, it is one of the most affordable options available to those who need access to business funding and do not have the option to take out a business loan or have established business credit.

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