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Benefits of Small Business Invoice Factoring

Factoring can help your SMB reduce the average number of days you spend waiting on customer payments from weeks or months to none at all. 

  • Take control of cash flow – get paid up to 90% of the invoice amount within 1-2 business days (or less) from the time you generate a customer invoice
  • Reduce overhead in the form of time and resources spent chasing customer payments
  • Cut operational expenses by taking advantage of suppliers’ quick pay discounts
  • Increase your ability to take on new business more quickly or serve larger accounts
  • Use generous payment terms as a competitive advantage to attract and retain customers

Whether you’re already factoring invoices, you’re comparing small business invoice factoring companies or you are simply exploring small business financing solutions, request a free, no-risk-or-obligation quote and we’ll go to work to try and help you find the ideal option.

Use small business invoice factoring to take control of cash flow.

Factoring as a Small Business Cash Flow Financing Solution

Invoice factoring is sometimes also referred to as cash flow financing or debt financing. Factoring is a financing tool that enables small businesses to leverage customer debt (unpaid receivable invoices) to access working capital – or cash flow. By improving cash flow, small companies are better able to take on new business, meet financial obligations and reinvest in their business more quickly.

Within days (or even hours) a small business factoring invoices can access money that might otherwise be tied up in customer invoices for 30-45 days, or even longer. Cash in hand, they can reinvest in their business immediately. Instead of waiting on customer payments, they can create more consistent, predictable cash flow.

Minimizing the costs of this cash flow financing solution is the key to getting the most benefit from small business invoice factoring. Fees and costs directly impact the amount of cash flow unlocked when a small business factors invoices instead of waiting for customers to pay. From the cost of receivables financing (the factoring fee) to add-on fees that small business factoring companies might tack on, the more a small business pays for factoring services, the less effective it is as a cash flow financing solution.

We offer some factoring options which are particularly suited for SMBs (small and mid-sized businesses) that many other factoring companies choose not to provide:

  • Spot factoring and microfactoring
  • Fast approval and funding
  • Competitive rates and advances
  • No application or due diligence fees
  • No hidden fees or fees for scheduling processing, invoicing or notifications
  • No factoring minimums – factor only when it’s best for your business

We also offer non-recourse small business invoice factoring, which can reduce or even eliminate a small business’s financial risk from bad debt.

Whether your small business is exploring the potential cash flow benefits of factoring invoices or you’re already factoring and you want to be sure you have the best program in place for your business, we encourage you to request a free, no-obligation quote. Unlock working capital and take advantage of the benefits of small business invoice factoring.

How Small Business Invoice Factoring Benefits a SBM

1. Expedited Cash Flow

Having adequate cash flow for expenses and growth is important for every business, but it’s absolutely essential for young startups and small businesses. For that reason, speeding up cash flow is often the primary reason a small business would use receivables financing. A small business factoring invoices can get up to 90% of the amount of a customer invoice within hours or days of when the invoice is generated, without affecting customer payment terms. Instead of waiting weeks or months on payment, they can stay focused on growing and running their company.

For example, imagine that a small business filled an order and they are going to bill their customer for $25,000, net due in 60 days. Instead of waiting 60 days (or even longer) for the customer to pay, they decide to factor the invoice (or sell it to a small business factoring company). Assuming a factoring fee of 5%, and an advance rate of 90%, here’s how it would work:

Overview
Day 1 Generate a $25,000 customer invoice and factor it
 – Same/Next Business Day Receive an advance of $22,500 (90% advance)
Factoring company earns $1,250 (5% factoring fee)
Day 30+ Your company also receives the $1,250 reserve amount after the invoice is paid

2. Reduced Expenses

Small business invoice factoring can help cut operational expenses. Speeding up cash flow, itself, creates additional benefits for small companies that use receivables financing. Some of these include:

  • Having cash on hand provides leverage to ask for (or take advantage of) cash and fast-pay discounts from vendors and suppliers
  • Avoiding unnecessary interest charges or penalties for late payments while waiting on receivables to turn
  • Reducing the amount of time and resources needed for accounts receivable activities, including bookkeeping, invoicing and collections

When deciding whether receivables financing would benefit your business, look at the whole picture.

A low factoring fee might actually be a bargain when stacked up against supplier quick-pay discounts, interest charges and late payment fees, and the cost of time spent on receivables financing tasks.

We understand the unique needs of small businesses. We can create a program tailored to your needs and preferences, and which enables you to get the most benefit from receivables financing.

3. Faster Growth

Small business invoice factoring can help you grow your business more quickly. A small business with slow cash flow may find they can’t take on new business quickly enough to grow. They might find it difficult to take on big orders or effectively service large customers. They might find it excruciating to have to stand on the sidelines if an unexpected opportunity presents itself but they simply don’t have the working capital needed to jump on it.

Factoring invoices enables you to unlock the working capital represented in your unpaid customer invoices as soon as same day an invoice is generated. This could make it possible for you to:

  • Extend super-generous terms to your customers as a competitive advantage
  • Replenish inventory and acquire supplies and materials you need to take on new business more quickly
  • Add assets, inventory or resources you need to take on bigger accounts
  • Take on bigger accounts – who often dictate payment terms to their suppliers of 60-90 days – without slowing down cash flow
  • Take advantage of fast-emerging opportunities
  • Quickly respond to marketplace changes or competitor’s moves

Apply for invoice factoring online (fastest way to get from application to approval and funding) or request a free, no-obligation quote.