Factoring invoice allows you to bring tomorrow’s money in today
Invoice factoring – or the selling of an accounts receivable invoice to a "factor" benefits your business with the cash flow it needs. Here are some of its keypoints:
- Elimination of bad debt. A non-recourse factor will assume the risk of bad debt, thus eliminating this expense from the business’ income statement.
- Invoice processing. Factors handle much of the work associated with processing invoices, including posting invoices, depositing checks, entering payments and producing regular computer reports.
- Unlimited capital. Factoring is the only source of financing that grows with your sales. As sales increase, more money becomesimmediately available. This allows your business to constantly be able to meet increasing demand.
- Take advantage of early payment discounts and volume discounts. If you can save 2 – 5% of your raw materials cost because you have the cash to pay within ten days, in addition to volume purchasing, you significantly reduce the true cost of factoring.
- Stop offering early payment discounts to your clients. Since you receive your money immediately, you don’t need to offer early payment discounts. Factoring will save every dollar in discounts that your clients were taking.
- Don’t give up equity. You do not have to give up any equity in the company (as is usually required with venture capital) or take on any partners with factoring.
- Don’t incur any additional debt. Factoring is not a loan and therefore your business is not incurring any additional debt.