Thu. May 30th, 2024

Do you own or work for a small business and have trouble keeping up with the flow of invoices? If so, you might want to consider using a factoring company to relieve yourself of this burden. 

Here’s what you need to know about these companies and how they can help you keep your business going strong. Learn more in this guide on using a factoring company for your small business!

Are you having cash flow problems?

Many small businesses will experience cash flow problems at some point in their life. This can be caused by any number of factors including late or slow payments, credit issues, and inventory management. One way to solve these issues is to use a factoring company. 

A factoring company is an organisation that offers loans by purchasing your invoices (accounts receivable) at a discounted price. In return, the business pays the factoring company monthly installments based on how much they owe the company.

 Unlike traditional loans, it doesn’t matter if you have bad credit as long as your account receivables are good enough. As long as you make timely payments, there are no penalties for early payment like with traditional loans.

When To Consider Factoring For Your Business?

Business owners often don’t realize how valuable their receivables are. They continue to spend time and energy trying to collect from customers, only to see them walk away without paying. 

Factor in the costs of chasing delinquent accounts, the time spent on administrative tasks related to invoicing and collecting, and the risk of not being paid at all, and it becomes clear that factoring is an important business-building tool. 

Factoring gives you access to cash immediately when your customer pays you. A factor will advance up to 95% of your invoice as soon as they confirm receipt of goods. 

In addition, factoring companies handle everything from collections calls to credit checks so you can concentrate on running your business. 

The peace of mind that comes with knowing there’s no need for expensive credit lines or unpaid invoices will make it worth your while.

How Does A Factoring Company Work?

A factoring company will purchase your invoices at a discounted price and then collect on the full amount. This is an excellent option for small businesses that need cash flow but are unable to borrow from traditional banks. 

The reason this is such a popular choice among entrepreneurs is because it doesn’t require any collateral or credit, as you are not taking out any loans. It’s also a great way to build your business because you can continue to make money while waiting for customers to pay their bills.

 For example, if your invoices have a 30-day payment cycle, the funds could be in your account withing 7 days of selling them. For many small businesses this means they can buy more inventory right away without waiting 30 days to get paid by customers!

Conclusion

Factoring companies are beneficial for small businesses because they allow you to focus on what you do best: running your business. 

If you’re interested in learning more about how a factoring company Australia can work with your small business, contact us today. A factoring company is perfect for any size of business, and it doesn’t matter if the number of employees is big or small. 

If you want to take advantage of the many benefits that come from using a factor, get in touch with one today.