Invoice factoring is a financing plan specifically designed for businesses that issue invoices with net terms, usually between 30 to 90 days. With invoice factoring, businesses can sell their unpaid invoices to get access to extra funding quickly. While several businesses have increasingly opted for invoice factoring amongst other funding options, many other businesses are not particularly aware of the features and benefits of the funding alternative.
Below is a somewhat invoice factoring guide for business owners looking for ways of financing the running or expansion of the enterprise.
Invoice Factoring Lets Businesses Offer Better Payment Terms To Win More Business
In most cases, small- to medium-sized businesses cannot offer shorter term invoices. There are also instances when shorter terms are not an option for clients as they have expenses of their own and are simply unable to pay earlier. These are a few of the many reasons many small businesses with outstanding invoices turn to invoice factoring as a strategy for reducing their cash flow gap.
Uses of Invoice Factoring by business owners
Below are some examples of how business owners can make use of improved cash flow from invoice factoring.
- Making Payroll in Slower Times
- Collecting Funds Faster For Unpaid Invoices
- Buying Materials For Projects
- Paying Rent and Reoccurring Bills
- Investing in Marketing and Advertising
Invoice factoring as a form of speeding up cash flow has existed for centuries. However, new funding sources for businesses, especially small businesses have emerged over the years, providing business owners with relatively affordable sources. The plethora of funding sources available to business owners sometimes make it a daunting task to choose the most suitable funding option. Consequently, owners of small businesses are advised to be as discerning as possible when making their choice.