Use Factoring to Increase Credit Lines

Business owners should be aware of the many types of financing options available to them, including lines of credit, credit cards, equipment leasing, and tapping into customers’ credit strength. Most business owners are familiar with the first three financing methods. Very few of them know about their ability to use their customers’ credit to gain capital.

Vendor Credit Lines

Businesses that purchase raw goods or inventory for resale should utilize vendor credit lines. Leveraging business credit with vendors can save you money, increase your bottom line, and present your business in the best possible light. Here’s why:

• Most companies use the same few vendors for 80% of their business.
• Converting accounts receivables into cash allows business owners to take advantage of pay discounts—i.e. 2% on net 10 day terms.
• Initially, factoring will assist your company with boosting cash flow.
• It can also yield long-term privileges such as the ability to negotiate better terms from suppliers and vendors, qualify for preferential pricing, and keep your balance sheet debt free.

Advantages of vendor credit lines include:

• Faster expansion rates than bank credit lines

• Being rated by volume and ability to pay

• Having the ability to use credit history to negotiate better prices

Using Customers' Credit Strength

Most business owners are not aware of factoring services and the opportunities to benefit from their customers' credit strength. Accounts receivable funding allows business owners to receive advances on invoices based on their customers’ credit or ability to pay. The factoring company purchases your company’s invoices and manages them based on the terms established with you, the business owner.

The increased cash flow will help you take advantage of 2% net 10 terms and offset the cost of factoring. Factoring will allow you more credit than a bank offer.