How Invoice Factoring Helps Small Businesses

When you run a small business, you know how hard it can be to find extra money at times. When you deal with accounts receivable, then you understand how it’s just not possible to wait for payment sometimes. The practice of factoring accounts receivable has been around for thousands of years. What helped people in the ancient world still helps modern business owners in today’s society. Instead of looking for loans to help with your cash shortage needs, other options are a lot easier to attain.

How Invoice Factoring Works

The practice of invoice factoring essentially works the same way as it did in ancient times. When you provide goods or services to a person or company who will pay you later, then you have an invoice. Usually, people wait between thirty and ninety days to receive payment on the receivable. When you just can’t wait anymore, then that’s where factoring plays a role. A factor will take the invoice and advance you the majority of the amount due. The factor then collects the payment from the company that owes money. You receive the remainder of the amount of the invoice minus the fees the factor charges.

Who it Helps

Running a small business is no walk in the park, and when money is short, it can be an extremely difficult time. Factoring can help business owners who can’t qualify for other types of financing. New business owners who haven’t operated their company for very long usually can’t qualify for business loans and other traditional types of financing. Banks normally want a business to have a few years of experience at least before they would consider lending to them. Regular business loans usually require a person to put up some sort of collateral to get the money. Factoring helps people who don’t want to front collateral to receive some cash.

How to Get Invoice Factoring for Your Business

Although you would normally think that all financing needs can be found inside a bank, this might not be true for finding places that offer to factor. Factors can be found in regular financial institutions, but they can also be found in other places. Sometimes the process can be done fully online from the comfort of your home or business.

Factoring can be very helpful for small businesses. Contact Valpzac Capital to learn more about invoice factoring.