Invoice Factoring for Startup Companies
Launching a startup company can be exciting, but also comes with a plethora of challenges and decision-making. Perhaps the most important decision to be made is how to finance your startup. There are many options for new business funding sources, however, some may be a better fit than others. Banks don’t traditionally love to finance a startup company, so getting a conventional loan might be off the table. What if there was another way to gain working capital without adding more debt to your balance sheet?
There is: it’s called invoice factoring. Invoice factoring for startup companies is a flexible financing solution that is a good way for new businesses to get the cash they need to cover essential operating costs. Startup factoring works for almost any B2B company in any industry. Factoring treats your accounts receivables as sellable assets, meaning you get paid for them right away, instead of having to wait 30+ days for your customers to pay their invoices.
How Does Invoice Financing Work for Startup Business Owners?
- It’s easy to get started! First, after a short application and approval process, continue to complete services and/or deliver goods to your clients as usual.
- Then, you’ll submit copies of your outstanding invoices and supporting documentation to your factoring company.
- Your factoring company will verify the work/delivery and then forward you the money. Usually 80-90% of the total invoice amount is delivered within hours of submitting the paperwork to your factoring company.
- Once your customers pay the outstanding invoice amount to the factoring company, you’ll receive whatever balance remains, minus a small fee for factoring.
- Repeat as necessary, as often as you’d like, with as many (or few!) clients as you wish.
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Benefits of Invoice Factoring for New Business Owners
Securing other means of business financing can not only be stressful and tricky, it could take a very long time. Working with a bank could take weeks or months to get the cash you need now. An invoice factoring company can have your startup company set up and ready to go within 3 working days or less. After setup, you’ll be able to access cash from your invoices within hours.
Factoring is a customizable solution for your early-stage business needs. Only have one client that is holding up business due to long payment terms? No problem! Want to factor all of your clients? That’s okay too. We have multiple factoring partners that are ready to work with you to find the best solution to your cash flow headaches.
As your business grows, so does your funding capability. You can accept new, larger accounts and/or clients without worrying that you won’t be able to finance them.
It Can Help Your Credit
Building your credit as a new business is of utmost importance. Because invoice funding relies on the creditworthiness of your debtors, not your own, it’s a great option for startups. It can help you pay off any outstanding debt, which will also help build up your credit profile.
It Can Help You Grow
Because of their shoestring budgets, entrepreneurs are often limited to covering just essential operating costs. Factoring invoices can allow for freedom within your finances, giving you the ability to expand marketing efforts, hiring and training new employees, or even expanding to new locations. Whatever you need the money for, factoring has got your startup company covered.