Whether you’re in high-end fashion or IT support, having money on hand when you need it is an essential part of owning and succeeding with a small business. Rather than having to wait a month or even two to get the money from outstanding accounts receivable transactions, selling those invoices for fast small business loans could make or break your next business venture.
Once considered highly risky, factoring loans have become more secure and therefore more popular over the past few decades. Some businesses even use this type of loan to pay for start-up costs. When a bank won’t loan you the money you need to expand your business, factoring companies offer the best and most effective solution.
The trick to getting a good rate for your factoring loan is to find a company that specializes in a certain area. This specialization could be the size of businesses they work with or the field within which they work.
For instance, some factoring companies only buy invoices from businesses that make less than $10,000 per month. This allows a factoring company to focus their efforts on just one type of business, giving you a better lending agreement. Because factoring does take a larger percentage of your profits than, say, a bank loan does, it’s important to find a factoring company that can offer you a competitive price offer.
Few small businesses have an accounts receivable department capable of collecting the needed monies quickly. Whereas it would take your own department weeks and possibly months to complete outstanding transactions, you can get the money up front by selling your invoices to a factoring company.
In cases where your accounts receivable are not outstanding but you need money now rather than by the due date of the original transaction, a factoring company can give you cash in hand. Some factoring companies claim that they can even get you the money you need within two days of contacting them! For small business, this immediate cash liquidity can be the difference between success and failure.
Another way that a factoring firm can offer a small business financial stability is by handling international accounts receivable. Like a regular collections department, few small businesses have the liquidity to train and hire staff capable of working with overseas transactions. Because a factoring company works exclusively in their particular niche field, the employees and staff there already have the experience necessary to make settling international accounts simple.
For a variety of solid business reasons, using a factoring company for fast small business loans is a highly beneficial practice. Whether your business is in an unexpected financial hole or you have the opportunity but not the funds to expand, selling your invoices for cash up front can make your business dreams possible.