Why Do Small Businesses Choose Invoice Finance?

When you own a small business, you know how important it is to collect your accounts receivable invoices within a timely manner. Most small business owners who do business with other businesses will offer accounts receivables so they can generate new clients. While this is a great method to expand your book-of-business, it can put your business in jeopardy when you do not receive payment after 30 days of billing your clients. You need constant capital to pay for your own expenses and advertising costs. If you are struggling to pay your bills, consider the benefits of invoice finance and get the funds you need to stay afloat during rocky times.

What is Invoice Factoring?

Invoice factoring, which is another way to say finance, is the process of selling your accounts receivables to a factor company so the company collects the money. The factor will give you an advance on the total due on the invoice and they will charge a fee, usually the balance of the invoice, to collect on the money due. There are several different types of finance you can choose from. This should be a consideration you should make when you are comparing factors in your area.

The Advantages of Invoice Finance

Now that you understand the basics of invoice finance, you need to understand its advantages. One of the main advantages is speed. When sell the invoices to a factor you can capitalize on the invoices with very little delay. The factor will give you up to 85 percent of the invoice as an advance and you should receive the payment within 24 hours of approval. Compared to the average collection time on an invoice (30 to 60 days), 24 hours is practically nothing.

Another benefit is that the cost of factoring is often less than the interest you would have to pay if you borrowed from your credit cards. Small business owners do not always have many options when it comes to funding. If you are turning to your credit cards to pay for expenses because you can not cover them with cash flow then you should seriously consider invoice finance.

If you have representatives that are calling your customers to ask for payment, you are paying your customers to deal with services you have already rendered. This can be a waste of money if you are trying to expand. Let your reps focus on expanding your business and leave the collection calls to the factor.

Make sure you do business with a reputable factoring company offering good advance rates and fair terms. If you choose a well known company and you read all of the details of your deal, you can use the money you earn from selling the invoices and generate new leads and new accounts. You can finance as much or as little as you need to. Make sure you take control over your debts and turn to invoice financing when you have no other option but to use your company credit cards.