6 Benefits of Using a Factoring Company

Small businesses are well-positioned to provide more personalized service than that available from larger companies, but bigger organizations have access to a greater amount of working capital. While small businesses may have to wait for clients to pay, larger companies already have the resources needed to invest in other projects. With invoice factoring, a small business can remain competitive with its larger rivals while being able to better serve customers. Below, business owners can learn some of the benefits of factoring.

Reduced Expenses and Overhead

Factoring companies can handle receivables from start to finish, which allows the client to save on the personnel, time and money that would have been needed to track and receive payments. This makes it easier for companies to meet budgetary requirements.

Reduced or Eliminated Risk of Bad Debt

A factoring company typically offers credit checks and advice on new and prospective clients. This gives business owners the peace of mind that they will be paid for services and goods delivered by the company. When clients choose non-recourse factoring companies, the company assumes the risk for factored invoices. If a customer can’t pay an invoice, the factoring company takes the loss.

Providing Leverage With Vendors and Suppliers

Having capital in-hand, rather than on paper, provides a company with the leverage necessary to negotiate more favorable terms with vendors and suppliers. These typically come in the form of volume or cash discounts.

Improved Credit Ratings

Because invoice factoring provides a steady, predictable cash flow, clients can pay bills on time and pay debt quickly. This can improve the client’s personal and business credit scores in many cases.

Trimming Expenses

If a business owner has to wait for his or her customers to pay invoices before the company’s creditors and bills can be paid, they may incur interest charges and late fees. With invoice factoring, the company will have the money it needs to pay all its bills on time.

Providing Access to Growth Resources

A factoring company’s goal is to help clients grow their businesses. From account managers to other resources, factoring companies continually strive to provide clients with what they need to meet their growth goals.