A factoring company can help your business grow in different dimensions.
Factoring is a financial service provided by a third party known as “factor” to its clients in exchange of accounts receivables. A factoring company lets you have an advance payment on your accounts receivables and pays you the rest of the amount once your customers clear their invoices. But, it is necessary to know how you can benefit from using services from a factoring company.
In this blog, you can read about the following key benefits of using a factoring company for your small businesses:
- Easy application process
- Steady and quick cash flow
- Professional Collection services
- Time management
- Non-debt funds
But, before starting with the benefits of using a factoring company, let's explore some scenarios when you would need their services.
When Do You Need A Factoring Company’s Service?
Imagine receiving bulk orders for your products you always dreamed of but your current customer is going to pay months after the purchase. Or have you ever felt short of ready funds to expand your company or to scale up your business? These are a few situations where you need an immediate solution for your financial situation.
Traditional bank loans come with few disadvantages such as the following
- Strict requirements on documentation
- Paper works for the application process
- Added interest rates on the funds received etc...
These are a few situations where you should approach a factoring company. A factoring company can provide you quick funding with easy repayment options based on your existing accounts receivables with other benefits to grow your business.
Benefits Of Getting The Services Of A Factoring Company
Factoring comes with many benefits to the business owner. Read further to know more about the key benefits of working with a factoring company.
Easy Application Process
Applying for factoring company services is an easy and quick process. The online application process starts with you creating an account on the company website. Documentation is also carried out online which enables you to complete the application process in a short duration.
Once you submit the required documents, the rest of the procedures are taken care of by the factoring company. The next step in the process is typically verification of your documents by the cash flow experts in the factoring company which leads to the approval of your application.
Steady And Quick Cash Flow
Small companies do face issues with customers who delay their payment or don’t get enough funding at the right time. A factoring service can help you with having a guaranteed cash flow which makes you worry less about your unpaid invoices.
Unlike other sources of funding, factoring lets you avail your funds faster. Taking an example of a bank loan, it takes a long time to get to the payment process. Whereas, in factoring, the company gets an upfront payment of a certain percentage of their invoiced amount within 24 hours of invoice verification.
Professional Collection Services
Keeping up with the customers regarding their due payments is a tedious job. Staying updated with the customers about the collection calls for a lot of paperwork and manual effort from the human resources department. With a factor taking over this job of updating the customer about payments, you can concentrate more on building your business.
A factoring company professionally handles this paperwork and manages the collection end of receivables. Handing over this job to a factor makes it easier to be updated with the collection process. This brings us to another major benefit of using a factoring company, Time- Saving.
Keeping track of your customer payment details consumes a good amount of time and human resources. This can take up your quality time to focus on improvement/growth of your company/business. A factoring company lets you cut down on these parameters and lets you make that time available for more important tasks.
Other funding options such as bank loans charge an application fee or processing fee, and the interest rate on the funds they provide you. Additionally, there might be other fees that come under application and processing charges. On repayment, these amounts add up making you pay a slightly bigger amount than you received.
A factoring company charges you for their services with lower interest rates than that of bank loans.
Invoice factoring lets you fund your business faster, easier and through reliable institutes. Invoice factoring takes over the hassle at the collection end also which makes time available for you to focus on growing your business.