When your business doesn’t have the cash flow it needs to operate smoothly, what can you do? Many business owners apply for a loan from a traditional lending institution, such as a bank. Unfortunately, a lot of small businesses simply don’t qualify for a loan from such institutions.
If you have experienced this issue, you do have other options. In fact, alternative lenders can open up a world of possibilities for small businesses and startups, as well as for larger companies.
One of the top choices for numerous business owners is called factoring. This practice, which is often referred to as accounts receivable financing, provides a convenient way for a business to create cash flow. Essentially, a business finances its accounts receivable through another company, known as a factor. Below, you may explore the top 3 benefits of invoice factoring.
1. Quick Cash Flow
The main reason that many business owners choose to finance their invoices is that doing so provides cash quickly. If you don’t have enough cash to pay vendors or cover payroll, you must devise an effective strategy. This alternative lending practice provides such a plan.
2. Higher Approval Rates
Countless business owners who operate reputable businesses may still be rejected when applying for traditional loans. This could be due to a variety of reasons, including a poor credit rating. However, those same business owners may stand a better chance of being accepted for invoice factoring. A company that provides this service (known as a factor) will generally be less concerned with credit history, and more concerned with how likely invoices are to be paid by clients.
3. No Collateral
Another major advantage of invoice financing is that the borrower does not need to produce collateral. The only forms of collateral involved are the invoices themselves. This means that a business owner will not be at risk of losing a major asset if any invoices remain outstanding for the factor.
You have many choices as a business owner, and that includes the types of financing you consider. If invoice factoring seems like a viable option for your company, contact GrowthCC for more information.