Small Businesses: Why Use Invoice Factoring?

why do companies use factoring

At Factor Finders, we put a lot of emphasis on what invoice factoring is and what it does – but at the end of the day, why do businesses use invoice factoring above other financing options?

Every company has its own set of unique needs, goals, and challenges to meet, and their reasons for choosing invoice factoring are equally varied. Below are some of the most common reasons why small businesses use factoring. If any resonate with you, consider how factoring can help you meet your business needs.

“My company is growing quickly and I need the cash flow to keep up.”

Contrary to popular belief, invoice factoring is not only for companies experiencing financial difficulty. Rapid success also creates the need for steady cash flow to pay higher expenses, purchase more materials to keep up with demand, and to accommodate continued business growth. Same-day funding prevents you from waiting weeks for a conventional loan to pay out.

“I want to take my business to the next level.”

If future growth is a part of your business plan, invoice factoring can help you make that goal a reality. Rather than waiting up to 90 days or more for payment from your current customers, you can factor their invoices and have the money to invest in pursuing new contracts and setting up your company to grow comfortably.

“My business is seasonal and I need cash for the slow periods.”

If your operations are cyclical then it is even more important that you have available cash when the work slows down. Invoice factoring is flexible, so you can factor when you need the money most – during the busy periods to stockpile funds or during slow periods to meet ongoing expenses.

“I want to build my company’s credit.”

Invoice factoring does more than provide an alternative to creating debt – it can help you eliminate it! You have total control over the funds you receive through invoice factoring, so you can take advantage of early-pay discounts and pay down previous credit lines for equipment or real estate. Clearing out prior debt will improve your credit score so you can qualify for future financing needs.

“I can’t qualify for traditional bank loans because I have poor credit/I am a start-up/I don’t want to pledge collateral.”

Of course, the most common reason that businesses use invoice factoring is because they cannot or will not qualify for a traditional bank loan or line of credit. Fortunately, invoice factoring is an ideal option for companies that are just starting to do work, companies that are recovering from a rough financial period, or companies that do not want to put up equity for a larger credit line. Your funding potential with invoice factoring increases as your sales increase, and as long as your customers have a steady credit history we can approve you for funding in as little as 3 to 5 business days!

What can invoice factoring do for your business? Whether your reasons fall in line with those we’ve presented or you have other needs that are particular to your company, Factor Finders can help you fulfill your business goals with a customized invoice factoring program. Contact us to learn more today!

Learn more about invoice factoring benefits and see the potential you’ll have to grow your business with this financing opportunity.

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