For businesses of any size obtaining funding for growth, overhead, payroll and purchasing materials can be an ongoing problem. Some companies may be able to obtain a traditional bank loan, but these are typically the well-established businesses that already have considerable capital.
Additionally, some smaller businesses and startups may also be able to obtain bank loans if owners are willing to use their own personal capital and assets. However, even in this situation getting the loan can be a very long and complicated procedure that may involve significant personal financial risk.
A better option for most of these types of businesses is to consider the option to factor invoices. Many banks will recommend this option to the businesses they work with when they cannot provide the financing necessary or when a loan is not possible because of the current status of the business.
The Speed of Factoring
Most bank loans will take weeks to go through the process, which is too long for a business to wait to make payroll, buy materials, or to take on new jobs and contracts.
When a business chooses to factor invoices, the process is very fast.. With a short application that takes just minutes to do online, you can be approved in as little as one business day.
The factoring companies don’t need to complete a credit check on your business, but rather they consider the creditworthiness of your customers. Once your application has been approved, and you choose to factor some or all of your invoices, you will receive a deposit in the business account within days.
When a business decides to factor invoices over a bank loan, there is no principal or interest to repay. This means the percentage of the invoices deposited, which will be up to 90% of the receivables, is yours to use as needed to keep the business operating.
After the customer pays the invoice, the factor then deducts the small fee and deposits balance owed inyour account. In essence, the factor works as your back office, handling collections while also maintaining contact with the customer until the invoice is paid.
As a highly flexible option, making the choice to factor invoices over the challenges of obtaining a small business loan makes sense for most companies. Just do the math, it is easy to see how valuable this service will be.