How and When to Use Invoice Financing

Do you have clients that take 30, 60 or even 90 days to pay their invoices? If you do, you are familiar with the strain that slow payments place on your company. Unless you have a reliable cushion of funds in the bank, paying suppliers and employees on time will be tough. And growing your business may be out of the question, at least temporarily, because growth requires cash.Companies that have this predicament have a couple of options. They can get a bank loan or a line of credit. But those are tough to qualify for and very hard to obtain. A better alternative is to use invoice financing, better known as invoice factoring. As a tool, factoring invoices enables you to get paid in 2 days, rather than in 30, enabling you to operate and grow your business.Factoring financing has many advantages over other products. First, factoring is relatively easy to obtain. Second, factoring financing lines are directly tied to your sales and have no arbitrary limits. That means that the more you sell, the more financing you can obtain. When is it appropriate to use receivables factoring?If any of the following two statements are true, then a/r factoring should benefit your company.1. You cannot afford to wait 30 to 60 days to get paid by customers. If your company’s biggest problem is that you need your money sooner than the usual 30 to 60 days it takes for your clients to pay, then factoring is the ideal product for you. A factoring company can eliminate the wait and make your cash flow predictable.2. You need money to pay suppliers or employees. Companies that need money to pay for ongoing expenses, such as employees or suppliers, can really benefit from invoice financing. Invoice financing will streamline cash flow and help you meet ongoing obligations. However, companies that need the funds to purchase equipment or to buy real estate will usually not benefit much from factoring. There are other products in the market that will be better.Invoice financing is a great tool that can help make payments predictable. This allows you to plan for growth and enables you to capitalize on new and exciting growth opportunities.