Core Advantages to Invoice Financing
Description: With bank loans and quick business loans available, what are the advantages to persuade a small business to consider invoice financing?
Invoice factoring used to be a mere side-line method for small business with no credit history to gain stable capita for their projects but these days it has become the norm. Almost every small to medium sized business sells their accounts receivable for instant cash that they otherwise would not immediately get from their customers or even from a bank loan. So what is it with accounts receivables financing that has made it such a lucrative choice in the market? Consider the discussion below that tackles the core advantages of invoice financing.
Advantage #1: It’s Not a Loan
The first advantage is that invoice financing is not a loan. Your business is not going to have to pay installments with high monthly interest rates. Basically you are selling your assets for a discounted price. Most factoring companies offer non-recourse financing which means they will be the ones to burden the risk and responsibility of collecting the amount from your customer, meaning you won’t have to worry about a thing. One more thing is that since this is not a loan, your credit history is not taken into account so your business has a higher chance of approval. On the other hand, it is your customer who will be reviewed so your approval mostly lies on their history of whether they pay their clients or not.
Advantage #2: Quick Cash
Customers tend to pay a business a good asset based lending company 30 to 60 days after they had signed the deal. This means that the small business still needs capital to get started for those initial two months. There are a lot of costs to cover such as production costs, payroll for the workers, maintenance fees, insurances, and others. With invoice financing all of this is taken care of therefore the business can then focus entirely on the task at hand.
Another thing is that a bank loan tends to take quite some time before it is officially approved and the cash is deposited. This is not the same with factoring companies – they can assess the request and have the money processed in just 24-48hrs. A business does not need to wait several long weeks for their finances to roll in since invoice factoring gets it processed in a day or two.
Advantage #3: Easy Money
If there is any reason why small businesses today prefer selling their accounts receivables it is because it is quick and easy money. To get a bank loan the company is forced to jump through a lot of loops and holes to get approved. There are too many legal papers to fill out and a lot of proceedings to complete. A single failure in any assessment process and the loan may not even be given. With invoice financing this is all irrelevant. The process is a lot simpler and a lot quicker. The factoring company will simply assess the invoice or value of the accounts receivables and then run a quick assessment on the customer that will fulfill it. Any small business can stabilize cash flow and attain sustainable capital with invoice factoring and it might be the solution for your business as well.