One of the most important characteristics of a successful business owner is the ability to compare and evaluate the options to grow, expand and finance the business.
If you have never heard of factoring account receivables or if you have only a vague idea of the benefits, this is a funding option that is free from the drawbacks of a business line of credit or a business loan. It utilizes the pending funds in your accounts receivable to provide the cash you need immediately. You will pay a small fee to the factor that is a percentage of the total, but there is no repayment and no interest since it is not a loan.
In addition to the lack of repayment requirements or interest, here are some other key factors to consider with the benefits of factoring account receivables.
Funding in Days
With your first application through the factor, it may take a slightly longer time to set up and process your account. However, this will typically be a day or two with most businesses approved within 24 hours and funding available in days.
Remember, most factors will provide 80% or more of the value of the accounts receivable you have selected. Verify if the factor allows you to select the accounts you want to sell and that you have a full understanding of any fees involved in the service over and above the factoring fee.
No Collateral and No Risk
Once you choose the option of factoring account receivables with a reputable factor, there is no need to provide collateral or to even go through a lengthy approval. There is no need for a credit check on your business as you have already performed the work, it is the creditworthiness of your customers that is important to the factor.
Additionally, the factor will take over collections on the account, limiting the time and effort you and your staff have in order to follow up with customers to secure payment. This back-office support saves both time and money while providing the funds needed to take on new work, make payroll, and even expand your business when the time is right.
