Why A Factoring Company

Factoring is seen as a cash flow solution that provides a business with various financial services they require. There are periods of time when the economy slows down and the first thing affected is cash flow. Many small startup companies get affected by this issue.

Companies look for a factoring company for the main purpose of quickly raising cash. This could also happen in a case where securing loans from other types of financing agencies has proven difficult.

This is becoming a popular trend for a lot of companies.

Reasons why a company may go for a factoring company:

1. Growth and expansion.

Companies sometimes receive orders that are exceeding beyond their normal capacity. In such a case factoring companies could come in and help finance this. It is a fast and easier way to raise a working capital.
Other financing institutions such as banks have a rigorous procedure and take a long time to process loans.

2. Short waiting period

Many businesses at times have to wait out for a long period of time before payment of services they have provided to a client. The best factoring companies can give you the money you need within 24hrs of you application
During the wait the company might get low on funds to enable the company to keep afloat. A factoring company could come in to help with the debt collection process on behalf of the business.

3. Debt collection services.

debt collection service

Once a company hands over the invoices, some of the best factoring companies take up the responsibility of following up on the clients and collecting the money owed. Factors can at times give you cash advance to help fill the gap left before all debts are fully paid
Startups may not have such debt collection departments established in their system hence the need for this service.

4. Loan qualification.

New startup companies might not be qualified to get business loans from banks and other financing companies. Factor firms have been able to come in and help them. Majority of banks do not lend to a business that is less than 3 years. They consider it a high risk factor.

With factors you need your invoices and a credit worthy standing with your clients.

5. Long-Term Factoring?

Long term factoring helps gives you:

Longevity of sales cycles hence better profit making.

Stable supply of products and services for long periods of time. Companies will be able to stock up well.

Constant operational cash flow. A successful business must have this to succeed.

Reduce the accumulation of debt by the company. Excess debts can compromise a company’s credibility.
Help build up your business credit rating.

6. Financial Security for Business

Factors help to financially advance 70 to 90{4348bc372134b33f547a4abc8ca54ec2607be38c3666d40c870df9bbc4170cc9} of the credited invoice amount. Once a client fully pays, the extra money is usually paid out to the company. This money left after the factor company has deducted the cost for the services rendered.