Your business’s cash flow is its lifeblood. Without a healthy flow, your business could struggle to stay afloat, and thriving begins to seem like an unreachable goal. Fortunately, business owners like yourself have plenty of options for maintaining a healthy cash flow. Invoice factoring is one of these options and one you should consider closely if you’re looking for a balance of predictability and convenience.
What Is Invoice Factoring?
When you deal with customers and clients in industries such as marketing or commercial sales, you often deal with invoices rather than up-front payments. However, sometimes it can take customers a considerable amount of time to pay up, leaving you to deal with a shortage in your cash flow which can be a true struggle for a growing business. When you choose to factor these invoices, you’re choosing to sell them to a third-party collector at a discount in exchange for cash upfront.
How Does It Benefit Your Business?
Simply put, invoice factoring gives you more immediate access to the cash you need when you’d otherwise be waiting weeks or months for your payment – if a client chooses to pay at all. You’ll receive a percentage of the value of the invoice as soon as the sale is finalized, which means you’ll have the cash flow you need to see to your business’s most important expenses, such as payroll, building expansions, inventory, and more.
Are There Any Drawbacks?
This is a common and rather popular means of improving a business’s cash flow and is fairly risk-free. The only slight drawback is that you will not receive the full value of the invoice in question, meaning you get less money in the long run. Typically, a company that buys invoices will buy invoices at a discount as a way of turning a profit when they collect. Otherwise, they may withhold a reserve sum, which they use to mitigate risk and deduct their fee.
Is It Right For Your Business?
This method ensures cash flow up front, though there will be less of it in the long run. This makes it ideal for new or growing businesses in which the availability of reliable cash flow is a primary concern. Established businesses that have the financial reserves to wait longer on customer payments may find other sources of financing with a better overall value in the long run.
Invoice factoring is an excellent resource for small business owners around the world. Learn more about this method of financing your business venture and what it has to offer your growth and development in the coming years. Contact Latta Commercial Capital today to start factoring your unpaid customer invoices.