Invoice Factoring: Friend or Foe?

“Invoice Factoring? Only failing business’s need factoring.” That was a response from a potential prospect the other day. In my opinion, invoice factoring is often times misunderstood, and for some, it has a negative connotation. If I had to give an analogy, it’s like the kid in school who you never talked to because you only heard bad things about them from other people. Therefore, you never had any desire to initiate a conversation. However, once you did get to know their story, you found out they were quite the opposite.

Invoice Factoring is similar to that scenario because time, and time again I hear that factoring is expensive, and businesses shy away because of it. I would say this, yes, it is more expensive than a bank. However, you are only paying APR on an invoice for the amount outstanding, and not a year. If you look at it that way, the APR is only around 3-5%. So it's not far off from what a bank would charge you annually. Compared to Pay Day Loan/Merchant Cash Advances it's extremely cheap.

The best thing about invoice factoring is that you are not carrying any debt. It does not affect your balance sheet in a negative light, thus helping you in the future when you go to a bank, or back to the bank in some instances.

Invoice Factoring isn't only for the companies who are treading water, but also a useful tool for those who have exponential growth, and need additional working capital on top of their line of credit, or loan. It’s also useful for startup companies who don’t have the financial record banks require in order to give them a loan. By using invoice factoring as an innovative financing solution, you can scale your business according to your business model.

Using an invoice factoring company to process your invoices will allow your company to flourish, and not become stagnant. It will free up working capital, and allow you to have cash in reserves in case of an emergency. In addition to working capital, the factor will offer free credit checks on potential customers, regardless if you plan on using that company to finance that particular job. It will also handle collections, which saves time, and money.

If a customer doesn’t pay, the factor will use their litigation resources to dispute the claim. If you own a business, invoice factoring is certainly a "Friend" not "Foe." There are so many reasons why factoring can be beneficial to your company. If you don't have the time to research companies, and find the best rate please let us do the hard work for you. We do not charge for our services. Check out our website Atlanta Finance Group