How the Use of Factoring Can Help Your Business
As a small business owner, you probably understand how tight money can be at times. If you have employees, you still have to write their paychecks even if it doesn’t leave that much money leftover. You have to keep your electricity and water on, so those are bills that can’t be ignored, either. Other bills like internet service and trash pickup just can’t be ignored. When you find yourself in a serious bind or cash shortage and aren’t sure what to do, there may be some options that are new to you. If your business operates with accounts receivable, then you may be in for a pleasant surprise
Learn About Factoring
If you’ve never heard of the practice of factoring, then it’s your lucky day. This type of financial service has actually been around for thousands of years already. Ancient Mesopotamians practiced factoring in their society, and the practice was well-known in ancient Rome also. When a company or business owes you money for services rendered, you usually have an invoice saying what they owe. This invoice, or account receivable, could be literal gold to your funding needs. When you find a factoring company to work with, you can take the invoice to them, receive a quick advance for the majority of the balance, and the company will then collect the due balance for you.
Understand the Process
When you want advances on your outstanding invoices, you will first need to see if you qualify for factoring. Usually, the factor will check the credit and payment history of the company that owes you money, not your credit. If the company checks out with a good history, then you are more likely to receive an advance quickly. If the institution that owes you doesn’t check out with good credit, then you may be turned down for the service.
Think About Other Options
Although factoring is a very solid business practice in the world today, there are still other financing options for your accounts receivable. You can also use the invoices as collateral for financing. This is called selective receivables. It gives businesses more flexibility to pick and choose which invoices to put up for financing. Ask your financial professional which option will work best for you.
Finding alternatives to funding your business can be quite helpful. When you have perseverance and positivity, you can accomplish anything you put your mind to.