If you run your own business and have been facing a cash crunch, you know that maintaining adequate working capital throughout the month can be a challenge, especially if you’re trying to survive an economic downturn or business simply hasn’t been picking up lately. Thankfully, you don’t have to take out large lump-sum bank loans if you don’t want to. An alternative option for getting the capital you need to keep operations running smoothly is invoice factoring. It is sometimes called accounts receivable, or AR, financing. With this option, you can sell your outstanding invoices for an advance on the amount. Here are a few of the top benefits of invoice factoring you should consider.
Qualification Requirements Are Straightforward
If you’ve ever applied for a conventional bank loan and gotten turned down, you know that the stringent requirements can sometimes act as an access barrier to companies that are young, have few employees or have less-than-ideal credit. The good news is, you don’t need to meet these requirements to apply for Invoice Factoring. In many cases, lenders are more interested in your customers’ creditworthiness than yours, since they’re the ones who will be paying the bill. Because the requirements are straightforward, most businesses may be able to qualify, giving you access to capital even if your current metrics are less than perfect.
It’s a Quick Process
Another advantage of Invoice Factoring is that it’s a quick process, especially when compared to the lengthy process of applying for traditional loans, which can sometimes drag out for months on end. In many cases, you may be able to get the advance within two weeks, one week or sometimes even within 48 hours of applying for financing. This means you won’t have to wait around for the money your company needs to keep going.
You Can Improve Your Cash Flow
Finally, the biggest benefit to using Invoice Factoring is that you won’t have to be subject to your customers’ invoice payment schedules and can improve your monthly cash flow. Because sending an invoice doesn’t immediately mean cash appears in your bank account, slow-paying customers can harm your company cash flow. With Invoice Factoring, you can ensure you have enough money on hand for your regular expenses.
When it comes to running a business, having enough working capital on hand at all times is key, but when customers take their time paying their invoices, it can be tough to maintain the cash you need to cover regular expenses. If this is the case, you can avoid having to take out a bank loan by applying for invoice factoring instead.