Maintaining consistently positive cash flow is a challenge, especially when you bill customers and give them 30 or more days to pay for products or services your company has already provided. While you’re waiting for money to come in, you could be missing out on hiring more employees and pursuing other forms of business growth. Fortunately, invoice factoring is a simple solution to this common problem. It provides the funds your company needs quickly without having to go through the many steps involved in applying for a business loan.
What You Need to Know About Invoice Factoring
When you factor an unpaid invoice from a customer, it means that you sell it to another company in exchange for prompt access to cash. The factoring company provides you with a set percentage of the invoice value minus its fees and any amount it keeps in escrow until your customer pays in full. When the invoice becomes due, the company that purchased it bills and collects money from the customer and not your company.
It’s important to select invoices to sell to a factoring company from only your best customers. That is because the company purchasing an invoice runs a credit check on the customer who owes the invoice. You don’t want to run the risk of rejection by attempting to sell unpaid invoices from customers with poor payment history.
Invoice Factoring Offers Several Benefits
It can take some time to build a positive credit history as a start-up organization. That means it can be challenging to obtain approval for business loans or credit cards in the meantime. Invoice factoring helps to level the playing field with the competition by giving you access to the cash you need to compete and pursue business growth. You receive the money quickly and don’t have to worry about pursuing collection activity against your customer if the invoice goes unpaid.
Please contact GP Solutions today to explore invoice factoring and other business financing options.