The Advantages of Factoring and Accounts Receivable Financing

For many small businesses, going into debt is the only option during financial hardship. Unexpected expenses and major cash flow issues can cripple a business. However, Factoring and accounts receivable financing can keep your business operating as usual without taking on additional debt or signing any long-term contracts. Learn how your business can benefit from this flexible funding option.


Unlike a standard bank loan, you won’t be taking on any debt with factoring. You’ll be selling the invoice to a company, but you won’t have to worry about interest rates or monthly payments. You’ll receive funds that are totally flexible, with no strings attached. Because it’s your money from an invoice, you will be able to spend the money on company equipment, daily expenses or reinvest in your company for future growth.


Accounts receivable financing doesn’t include a credit limit. You may not receive the entire portion of the invoice, but you’ll be able to use this method of financing for any size invoice and any amount. If you’re worried about using a factor for every receivable, you can typically choose which one to receive immediately.


As long as you have an established account with your factor, you’ll receive cash as fast as 24 hours. While other companies are waiting 30 days or more for their accounts receivables, you’ll be able to use your cash for current expenses without having a cash flow crisis. From payroll to unexpected machinery breakdowns, some expenses can’t wait for a month or more.


Whether you’re just getting started as a small business owner, or you have a solid credit history, you’ll be able to receive the financing you need. Becauses factors are based on the credit score of your customer, you won’t need to prove a strong financial history or a high credit score. This makes factoring an excellent alternative to costly small business loans.


While there are subtle differences between factoring and accounts receivable financing, both options allow you the freedom to use your invoice as working capital in just a few days. As long as you have invoices that are waiting to be paid you can benefit from this dynamic funding strategy. Consider the types of customers you work with and if you have any long-term accounts that would be useful to factor, and use this method to keep your business afloat during rough times of the year when your working capital is particularly low.


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