A great many small businesses these days are resolving their cash flow issues by participating in factoring, which can put cash in your hands very quickly. A factoring company will advance you an amount equal to something like 80% of the value of your invoices, after establishing that you have credit-worthy customers. Once those customers pay the invoice amounts, the factor would remit the other 20% to your business, after subtracting out its factoring fee.

Advantages of Factoring

Rather than having to wait one or two months to be approved by a bank for a loan, you can have cash in your hands within just a few days when factoring. It’s fairly common for a company to receive cash within 24 to 48 hrs. after having invoiced its customers. Factoring is also a really good option when you have a startup company that has no credit history, and would therefore not be approved for any bank loan.

If you happen to have a poor credit history, this really won’t matter much to a factoring company, because it’s really the credit-worthiness of your customers which is more interesting to a factor. Another reason factoring could be very much to your advantage is that it will allow you to have a smaller staff dedicated to collections because once you sell your invoices, the factoring company is obliged to make those collections.

That means you can re-allocate your important personnel to other business-specific tasks, rather than to act as collection agents for your invoices. One last advantage of using factoring is that it can fill in any gaps in your cash flow, which may have been caused by slow-paying customers. This can help your business run much more smoothly because you will not be subject to sporadic incoming revenue.

Considering Factoring for Your Small Business? 

Nothing can put cash in your hands faster than factoring, so if you need a quick cash this may be the way to go. Contact us at LMC Alternative Business Capital so we can discuss some factoring possibilities with you.