6 Prominent Benefits of Invoice Factoring
Are your bills pending and you want cash immediately? Are you fed up of your clients who don’t pay your invoices on time and do you get tired of sending them reminders after reminders and still they don’t give a damn?
Don’t worry! There is a solution. It’s invoice factoring from someone like Crown Financial. What is invoice factoring? If you haven’t come across it yet, here’s some useful information about it and its amazing benefits.
What is Invoice Factoring?
In a typical invoice factoring situation, you have to sell your invoices to a company called factor like the above-mentioned Crown Financial whereby they get the right to collect the payment on those invoices and in return, they pay you the face value of the invoices minus a discount, generally 2% to 6%, e.g. Crown Financial charges the lowest i.e. 2%. They pay you around 75% to 80% of the face value of invoice immediately and the remaining amount when your customer pays them the invoice value.
Now, let’s look at some prominent benefits of invoice factoring.
1. Quick Access to Cash
One of the most important benefits of invoice factoring is an easy and fast access to finance that is provided within 24 to 48 hours upon approval. The initial processes take up 5-10 days on an average from the receipt of your application and required documents. This is significantly less time as compared to the weeks and even months banks take to approve your loans.
2. No Debt
When you choose invoice factoring and get it, you are not in a debt. So, you don’t have any liabilities on your balance sheet. This translates into no loan payment every month, a clean balance sheet and a great peace of mind!
3. Comfortable Requirements
Understand that unlike lenders who have to think about your financial status and so, they keenly check your credit records and approve your loan proposal only if you have a steady source of income and clean credit history, factors don’t have to worry about your financial status but of your customers. So, conditions for approval of factoring are quite comfortable and you are approved even if you are a startup, don’t have tax returns for three years, deal with only one customer, have not-so-good credit history or have cash flow problems due to a rapid growth.
4. Additional Help
While you may think that the discount rates of factors are higher than the interest rates of banks, you should consider that factors provide you a lot of additional help that banks don’t offer. E.g. they take over a sizeable portion of your accounting work, help you with credit checks and create financial reports from which you become aware of where you stand. The previously mentioned Crown Financial, in addition to these services, can even help you meet the special requirements if you secure a government contract which is a great opportunity for you. They also help you maintain a good status with the buying regulations of the government. With their help you can ensure the challenging process to establish the government relationship.
5. You are Free to Use the Cash Whatever Way You Want
With the option of factoring, you get cash which you can spend in whatever way you want. Unlike a loan taken from a bank or other financial institution, you don’t have to purchase any equipment or any other assets specified to them. Thus you have a total control on your cash.
6. Save or Make Money
With a thoughtful structuring, you can either save or make money with factoring by taking benefit of early discounts, increasing inventory for big orders, negotiating bulk discounts from suppliers or adding overhead and staff needed to fund expansion.
Have you become stress-free now? So, go ahead and choose the option of invoice factoring to get paid immediately for your products or services.