Top 5 Ways to Grow Your Business with Invoice Factoring Services
What will you do when your business suffers from a financial need in the short term? Sellers will approach bank loans or borrow from other people. But high risks are present in both of the methods. Sellers should pay the money on time even if they face loss.
But an alternative method of lending cash in the short term helps to level up your business fast. Would you like to know? Stay tuned to this article for this new method.
What is Invoice Factoring Service?
Let’s open the secret method, name is Invoice Factoring. Invoice Factoring is finance where you give all your unsettled invoices to the factoring concern. The seller will get immediate liquidity according to your due invoices. On the other hand, the factoring company will gather the invoice amount directly from the customers.
Example:
An ABC Company sells the invoices to the factoring company for immediate cash of 2,00,000. The factoring company monitors the invoices and charges a 1 to 2% fee from the seller. So, 2,00,000 *2 / 100= 4,000 (This is the fee of the Factoring Company). The seller will receive 1,96,000 from the factoring company.
Why Factoring Services Better Than Loans?
Before knowing how to grow your business with invoice factoring, it is essential to understand why factoring is better than loans.
- Easy paperwork and quick access to cash
- Documents and formalities are less compared to the loans
- Give more importance to customer credit scores, not your credit score
- When you have the right documents, you will get cash within one or two days
- The factoring company provides unlimited funds according to your unpaid invoice. There is no limit to cash
Invoice Factoring Requirements
- A good credit score of clients- The factoring company will check the customer’s credit score than yours. Once you sell the invoices, the entire responsibility will go into the hands of the invoice factoring company. So, they expect a high credit score from customers.
- Complete details of your business: Before accepting your unpaid invoices, the factoring company needs the details of your customers, personal contacts, email addresses, balance sheet, income statements, etc.
- Unpaid Invoices: Reveal all unpaid invoices with accurate customer names, dates, and times in a report format. These are the deciding factor in your eligibility approval.
- Bank account in the name of your business: Factoring companies transfer the fund to your business account, not your account
- Personal documents: With unpaid invoices, you should attach your documents like a driving license, passport, Aadhar card, etc… The factoring company has to check whether the opposite person is legal or illegal.
How to Grow Your Business With Invoice Factoring (Top 5 Ways):
1. Immediate Access to Cash:
When you require instant cash to grow your business to the next level, this is the best method compared to loans and borrowings from your friends. Sellers are free from the tension of monthly payments and installations.
When you meet the agreed norms of a factoring company, it is easy to get liquidity within a day compared to bank loans. On the other hand, when you approach bank loans, it will take weeks to process your funding request.
2. No Restriction to Use the Money for a Particular Purpose
When you approach loans in banks, you should show the correct details and the correct reason for the need for cash. Eg: A machinery loan used to buy machinery.
But the factoring company allows the seller to use the money for all purposes. Sellers are free to use the money without any limitations.
3. The Company Keeps on Working Forever
When will the company gets slow down? When the seller doesn’t have cash. When you try to run your company without revenue, you will face a downfall soon. Sellers can’t balance the employees payroll, expenses of the company, etc.
A successful company depends on the health and wealth of employees. Here, the factoring company enters the savior for the seller to get immediate cash in fast approval.
It helps the seller to grow their business unstoppable forever.
4. No Tension of Payment Collection From Your Customers
Once, you sell your unpaid invoices to the factoring company, you are not responsible for the customer’s debt. The tension of the payment collection will go into the hands of the factoring company.
After selling your unpaid invoices, you can start focusing on your business growth, and plans, tie up with other concerns, expansion of the branches in other areas, etc… without any delay
5. Chances of Fraudulent Customers Are Lower
In bank loans, they check only your creditworthiness for loan approval. But invoice factoring is the opposite of bank loans.
The factoring company checks the customer’s creditworthiness for fast approval. It turns out an advantage for the company to stay away from fraudulent customers and maintain a good reputation in the market.
6. Affordable Method for Small to Large-scale Industries
Invoice factoring is suitable for small-scale to large-scale business owners. The factoring company doesn’t restrict the business owners, whether small or large. On the other hand, they encourage every concern to grow their business and reach the next level. Their main motto is:
- Provide fast cash when their documents are correct
- Ready to accept the risk even if the customers are not paying the money
- You will get the fast approval of cash when your customer credit score is right according to their guidelines
7. Easy to Invest in Other Sources
When your cash flow is improper, the company cannot move onto the next level in any areas such as payroll of employees, investments in other sources, personal expenses, company expenses, etc…
There is no visibility of the business growth when the cash flow is improper. But invoice factoring does not loosen the track of the business. Instead, it gives more confidence for the business owners to move forward in their field.
It motivates business owners to invest money to any extent without any cross-questions. It increases the trust and creditworthiness of the business.
FAQ:
- Is the Invoice factoring method suitable for my business?
Yes, it is suitable for all businesses to get immediate cash from the factoring company when you should have the proper filing of invoices.
2. How many days will it take to get immediate cash?
When the seller meets the agreement terms and conditions, usually within a day or two, you will get the cash in your hands.
3. Invoice factoring or bank loans, which is best for my business?
When your business needs fast cash, you should opt for invoice factoring than loans. But when your customer credit is not good, you should opt for bank loans for immediate approval.
4. Is the invoice factoring method suitable for small and large businesses?
Once your documents and invoices are perfect, you are eligible to get cash from the factoring company, whether small or large.
5. How much will you receive from the factoring company?
The factoring company advances the business owners by 90 percent. Once they get the money from the customers, they settle the remaining amount minus the fee of the factoring company.
To sum up:
- Faster method compared to bank loans and borrowings
- Immediate cash in exchange for due invoices
- Escape from monthly installments
- Fast approval and free-to-use money for any purpose
To have a successful and continuous cash flow in the business, invoice factoring is the best method to gain funds in a short term.
For that, you need to maintain a proper invoice for your business. How can you easily generate an invoice? By using our online invoice generator called Invoice Temple trusted by over 40,000 small business owners. With the help of this software, you can create invoices faster and send e-invoices for your client through the mail.
What are you waiting for? Use Invoice temple to create your invoices and get faster eligible for immediate approval.