Sooner or later, every business will need financing to grow. Other owners will try to get a business loan or line of credit while most will try to qualify for venture capital or angel financing.
All these business financing tools work well, but they also have a very important trait in common. They are out of reach for most owners and they are also hard to get.
There is another way you can finance your business growth. Financing that is easy to qualify for, quick to set up and very cost effective. Aside from that, this financing will also grow with your business. And most of the time, you won’t get it from your local bank. Invoice factoring is what this form of financing is called and you will be able to get it from a factoring company.
Factoring is different than a bank loan and it works well if your biggest problem is that you can’t wait the 30 to 60 days that commercial clients take to pay their invoices. Basically, the payment time is cut to two days with invoice factoring.
Factoring is not difficult. The factoring company buys your invoices (at a small discount) and pays you for them immediately. Then, the factoring company waits to get paid by your client. The net result, you get immediate working capital to pay business expenses and grow. The stress of having to wait to get paid is what you will also eliminate and you can count on a predictable cash flow.
A form of financing that offers two very distinct advantages over bank loans is called factoring. First, it’s very easy to qualify for. Doing business with strong commercial clients or the government is considered to be your main requirement. Second, factoring financing grows with your business. As your invoicing grows, so does your financing. Because of this, easily covering the increasing costs of running a business that is growing is what you will be able to do.
Factoring companies also offer a similar type of financing and this is known as purchase order financing. Purchase order financing provides you with financing based on your purchase orders from large commercial clients. Ideal for resellers and distributors that are quickly growing is purchase order financing.
A factoring company will be able to offer alternatives to traditional financing whether you need financing because your customers pay you in 60 days or because you have a large purchase order from your biggest client.
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