Why More Businesses Are Using Factoring

Why More Businesses Are Using Factoring

Many companies offer clients 30 to 60-day payment terms and then experience financial difficulties as a result. To provide a solution to this dilemma, factoring companies purchase your unpaid accounts receivable. You receive an immediate advance of 70 to 90 percent of the value of the invoices and the balance when your customer pays in full. Factoring has become popular with businesses in construction, transportation, manufacturing, oilfield services, staffing, and other industries. Here are some of the advantages of this form of funding.

Strengthen Cash Flow

Company cash flow can take a hit when clients are slow to pay their bills. This can impede business growth. Factoring gives you the strong cash flow you need to pay the salaries of your employees, purchase equipment and inventory, advertise your business, and initiate new projects.

Qualify Easily

Even new businesses, small businesses, and businesses with questionable credit can qualify for accounts receivable factoring. This is because factoring companies are more concerned with the creditworthiness of your clients than with your credit status.

Turn Difficult Situations Around

If your company is experiencing difficulties, bank financing may be elusive. However, accounts receivable factoring provides an inflow of cash that can lead to improvement and profitability. Even if your company has recently been through bankruptcy, you may still be able to obtain funding through factoring.

An Alternative to Traditional Funding

When businesses require additional funding to strengthen cash flow and spur growth, they usually first attempt to obtain loans or lines of credit from traditional financial institutions such as banks or credit unions. Their applications may be turned down, though, because their industries are deemed risky. Under these circumstances, factoring is an effective alternative to take care of their funding needs.

For more advice on using accounts receivable factoring to improve cash flow and grow your business, get in touch with Atlas Capital Solutions.