Factoring for Small Business – The Essential Guide and Most Important Benefits

As a small business owner, you probably did some crucial thinking before you started your enterprise – as any good business owner does. But beginning a business of your own entails more than just the proper planning – it also entails a day-by-day effort to make your business grow.

Small business factoring

It requires a lot of dedication and commitment, and if you’re not passionate about what you are doing, it’s easy to throw in the towel and walk away. But when you’ve invested so much into your business – you want it to succeed. So, where can you can get the support you need?

Small business funding support

One way to get support and to help your business succeed is to make sure that you have sufficient small business funding and have cash on hand at all times.

Having access to a revolving cash flow is crucial. If you’re having difficulties with cash flow, however, you’ll be happy to know that there are options you can take advantage of, which include factoring.

What is factoring?

Factoring is a type of financing solution where a third party (factor) buys your unpaid business accounts and then gives your business the cash it needs as an advance. The advance is based on the amount of your accounts receivables. Often, the third party, or factor, will also be the one in charge of collecting the receivables from your customers.

With factoring, your business can have immediate access to cash even when you still have unpaid client invoices.

Benefits of factoring

  • Save time and effort – One main benefit of factoring is that it allows you to save time and effort, specifically time and effort spent collecting payments from your clients. Rather than having the burden of collecting from your clients, you can save time and energy and redirect your efforts to other urgent business areas that can help your business grow, such as developing strategic marketing campaigns, establishing a better relationship with customers, and getting more, and better, leads.
  • An opportunity to grow – The extra cash you have on hand can be used for different purposes as well, especially when it comes to furthering your business growth. You can, for instance, use the cash to hire another sales representative who can acquire more customers, or you can buy a certain piece of equipment which you have needed for some time but couldn’t afford to buy.
  • No collateral – Unlike a bank loan, factoring will not require you to put up any kind of collateral, such as your property – the collateral you have is your unpaid invoices. It’s as simple as that.

Factoring is a highly flexible and customizable financing solution ideal for almost every small business, and allows you to guarantee a healthy cash flow – giving you opportunity to focus on growing your business.

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