Provides instant cash.
The most important advantage of factoring is that it provides the company with immediate cash. Those funds should help improve cash flow and provide resources to cover expenses. They also ensure a constant flow of working capital, which translates into greater freedom in making business decisions.
Available for small businesses. It allows them to issue invoices with deferred payment terms without any consequences for financial liquidity.
Most of the invoices issued by companies have a deferred payment date. These are usually 30-60 day periods. Smaller entities cannot afford this method of invoicing because it affects their financial liquidity. As a consequence, the chances of entering the competitive market, surrounded by large entities, are minimal. Factoring allows you to offer deferred payment terms because it can finance invoices shortly after they are issued.
It helps to determine the credibility / creditworthiness of companies.
One of the main challenges in offering deferred payment terms is trying to establish the creditworthiness of potential customers. Most of the factors, as an additional service, offer reviews of the creditworthiness / creditworthiness of contractors.
It is relatively easy to get.
Invoice factoring is an easier way of financing than most other solutions. The basic requirement is the ability to issue invoices with deferred payment terms, which are payable by creditworthy counterparties. In addition, the owner of the invoice must be free from liens, encumbrances and legal problems.
The limit may be increased as needed.
The limits are linked to the invoice balance. Consequently, they can easily increase as the invoice values increase and the creditworthiness of the invoice owner's counterparties remains good. As a result, factoring is an ideal solution for companies experiencing an aggressive stage of growth and in need of financing.
This may be a short-term solution.
Factoring can be used as a short-term solution if temporary cash flow problems are forecast. Most factoring companies are happy to develop six-month plans to help you solve your cash flow problems.
Uses invoices as collateral .
Most conventional solutions, such as lines of credit and loans, require significant assets as collateral. These assets may include real estate, inventory, equipment, etc. Factoring is different. It only requires invoices (receivables) as collateral .
It does not require resignation from capital.
The essence of factoring is that it does not require you to give up your equity. This is an important advantage for the invoice owner, because resignation from equity capital results in resignation from not only part of own company, but also part of control over it. Moreover, the sale of capital in a difficult financial situation is not conducive to obtaining a favorable price for the seller. In factoring, the relationship is based solely on time and expires at the end of the contract. The invoice owner never has to give up capital in exchange for financing.
It can be used by small businesses.
Factoring has the big advantage that it is accessible for small businesses. It is almost impossible to get a loan or a line of credit for these companies. Many lenders base their decisions on the financial history of the potential borrower.
If you are interested in financing your business, want to become our shareholder, or want to ask another important question - contact us