What Can Factoring Do To Your Small Business?

It’s hard enough if you are operating a small business that offers customers a 30- 60 day grace period on payment simply because of a lack of working capital. However, invoice factoring can come in handy by giving your business the lifeline it needs. It is a form of factoring finance where the entity sells its invoices to a third party (factor) at a discount, usually between 70-90% of the total invoice. The factor is left to chase after payments from customers and makes a profit in the event of full payment.

Upon the entity selling its invoices, they receive immediate cash for their operations. In case you’re wondering what factoring finance can do to your business, read on.

Immediate Cash Flow

As a small entity, you may not have the financial muscle or assets to acquire business loans, and if possible, they usually take more extended periods to process. Such lapse of time may spell doom to your business. Invoice factoring as a form of factoring finance comes in handy and ensures that business operations are afloat. You don’t have to wait for your customers to pay you back to sustain your business.

On-going Cash Flow

If it makes sense for your business ton consistently have on-going cash flows, you could cement your relationship further with a factoring company to ensure constant flow, thus not hampering operations.

High Approval Chances

Credit score, loan history, and collateral are the least of a factoring company’s worries when it comes to factoring finance. They are more concerned with your customers’ payment history and their ability to pay. It’ll give them a pretty clear picture of the kind of risk they are getting into. Therefore, if you exhibit a low credit score or other underlying aspects that may dent your financial history, Factoring finance may come across as an essential mode of business financing.

Outsourcing

Following up on payments sometimes proves to be hectic and time-consuming. Outsourcing such functions to a factoring company free the entity’s time to deal with other essentials or tasks on its plate.

Productive Customer Relationships

Debt collection can be frustrating and downright tricky. Handling over such responsibilities to a third company absolves you, and you don’t have to be the bad guy anymore, hence promoting positive and strong relationships with your customers. It may also help you create a long-lasting relationship with your clients too.

 

Conclusion

Not all sources of financing work well with businesses. As a business owner, you’ll need to pinpoint what works well for you. If factoring finance as a source of business finance works well for you, by all means, go for it.

 

Beginners Guide to Factoring Financing

Business owners are happiest when they get paid by their debtors and they dread waiting for payments. The wait for payments costs business owner’s opportunities since the wait starves business owners of the much-needed cash.

How Factoring Finance Australia Works

Factoring finance Australia helps business owners to ease the pain of waiting for payments from debtors. Factoring finance Australia works by enabling companies sell their invoices to factors for the sums that are outstanding at a particular time. Factoring finance Australia does not take as much time since it does not have a lengthy application process like it would with a bank loan. The factor earns a fee when the debtor pays up.

 

The main benefits of factoring finance Australia are:

  1. As a business, you will free yourself of short term financial constraints that may arise due to cash being held by debtors.
  2. The business can continue running normally without being held down by trade receivables. It, therefore, acts as a good bridge financing option.
  3. Factoring finance Australia provides money upfront for the business to continue its operations without hitches. The funds can be used to fund the growth of the business.

 

Guide to start factoring finance Australia

Factoring finance Australia is certainly a good option to have in your business to access short term cash. As a beginner, you should consider the following factors:

  1. Companies offering factoring finance Australia. There are many companies offering to factor and you are better off looking at the ones in your local area as they are better placed to understand your business and also know your debtors.
  2. Cost. Factoring finance Australia comes at a cost to your company. The cost depends on the duration it will take for the debtors to pay the invoices to the factor. You should read between the fine print to determine whether your company has the ability to meet those costs.
  3. Duration. The duration of factoring finance Australia otherwise the credit period varies between debtors. The longer the duration the more the cost due to the time value of money concept. Therefore, you are better placed to offer invoices that are likely to be paid within the shortest time to lower your factoring finance Australia’s costs.
  4. Terms and conditions. There are other conditions that a factor may have and you should understand them very well. For instance, how to solve disputes should they arise and any other legal issues that may exist.

 

In conclusion, factoring finance Australia is a viable option for short term financing for your business.