Do You Know if Invoice Factoring is For You?

For a start-up company, invoice factoring may be the answer to economic woes caused by a challenging time in bank financing. today there are more businesses turning to this type of funding. Why? Because these days it is often the only way they can get cash. Start-up companies without no proven track record or debt that may make them unattractive to banks when it comes to getting a loan. But factoring can get you cash in hand immediately. Today, factoring is experiencing a resurgence in popularity as many small businesses are still struggling from the recent economic finanical crisis.

Invoice factoring is a practice that enables a small business to sell its accounts receivable invoices to a third party at a discount, which garners them immediate cash so they can finance their small business. This method helps them cover short-term cash needs during periods in which these needs exceed cash flow.

Keep in mind, however, invoice factoring is not a bank loan, so the business' credit is never up for inspection but rather the debtor's (i.e., the party named on the invoice) and there's nothing to repay. This method of finance was once quite popular in early merchant banking activities.

Here are a few of the advantages to factoring:

Invoice factoring maximizes cash that is available to you, often providing more cash than a traditional bank's lines of credit. There is also no line of credit amount because you are selling your existing invoices.

Cash flow becomes more predictable because in addition to speeding up the process by which your accounts receivable invoices are paid, invoice factoring can make managing your assets easier. Payments from factoring services are more predictable than when customers will pay their invoices.

Factoring is not a loan, so you are not taking on any new debt. It removes anyt restrictions as weith traditional fundingso you're able to meet the day to day needs of your business as well as to take advantage of future opportunities.Factoring services will not ask for any equity stake in your company and the money is available immediately upon completion of work or billing. You remain in control of your business, not a bank or cosigner. Likewise, not incurring new debt will keep your credit score healthy. A healthy credit score can insure future healthy growth of your business.

A business owner with cash on hand gives them extra bargaining power. Suppliers often give discounts for purchases in bulk or for automatically debited accounts. Having cash enables you to take advantage of these offers, and saves money in the long run.

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Kristin Gabriel writes for The Interface Financial Group (IFG). The factoring company provides short-term financial resources serving clients in more than 30 industries. IFG offers expertise in factoring, accounting, finance, law, marketing and banking. For more informaiton, go to http://www.ifgnetwork.com

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