Financing with Factoring

If you are a small or startup business that is struggling to pay for overhead, factoring may be your solution. Regardless of business size, factoring is a way to avoid loans and get the financing needed to pay bills and grow revenue. If you have money tied to accounts receivable, chances are that you spend more time waiting to be paid and resources on billing and payment collection. Learn more about how using freight factoring companies helps get you money to use quickly and frees up more time and people towards making sales and helping customers.

How Does Factoring Work?

A business first submits an online application, which is less complicated than applying for a traditional bank loan. Once approved, the business sends invoices to their customers as normal. The business then decides which invoices should be sent to the factoring company and moves forward. Once received, the factoring company wires funds to the business, usually within a day. The factoring company then waits on the payment from the customer and charges the business a fee.

Benefits

Using Freight Factoring Companies helps new businesses shorten their cash flow cycle so that their funds are not tied up in accounts receivable and unpaid invoices. The funds from factoring can be used towards manufacturing more products with needed equipment or rapidly expanding services. Vendor bills can be paid and the business credit rating will improve with a record of bills being consistently paid on time. The criteria for factoring approval are based on the strength of the customers, rather than that of the business, which may still be getting established. The factoring company also acts as an accounts receivable service so that employees can spend more time selling or actively engaged in growing the business instead of chasing down payments.

Not a Loan

Factoring is not a loan. Rather, it is a financial transaction between two entities and an alternate financing method. Capital is not required, seasonal income is allowed, and financial losses are acceptable. There is no limit to how many invoices can be factored, and fees are based on the time it takes customers to pay, invoice volume and total amount funded. To be approved, financial statements, including tax returns, are not required and your personal credit is not reviewed. There is no lengthy approval process from a freight factoring company, unlike that of a bank loan.

Working with freight factoring companies provides secured funding and resolved cash flow problems. By sending your invoices to the factoring company, you allow them to be your accounts receivable resource that collects payments and processes them. The factoring company has professional experience to handle the customer invoices and shortens the amount of time spent managing accounts receivable. Even invoices get paid sooner once a third-party collector is involved. In the meantime, your business will have funds to use for business expenses and will no longer be restricted by money tied to unpaid invoices. Businesses with unbalanced and unpredictable cash flow benefit from factoring as they can continuously pay employees and suppliers. Other industries that use factoring include trucking, staffing, consulting, oil and gas, and manufacturing.

Weston Barnes is a write and an avid reader. When he's not writing about business, marketing, health, pets, or relationships, he's immersed in his latest book.