AR Factoring: 7 Advantages For Small Businesses

Is your small business struggling from a lack in income over your accounts receivable? You may be interested in learning about accounts receivable (AR) factoring and what it can do for your business. Here are seven advantages to AR factoring for small businesses:

 

  1. Financing to Grow with Sales

 

If your sales go up, your financing capacity goes up too. AR Factoring is one of the few financing options that allows for this, and it can be especially helpful for newer businesses that are looking to build up working capital early.

 

  1. Bad Debt is Gone

 

Since the factoring company is taking care of collecting payment, they’re assuming the risk that comes with that debt. If it’s a bad debt, you don’t have to worry about accounting for it in your records.

 

  1. No New Debt

 

You don’t go into debt with this financing option, you are simply selling invoices to reap earlier repayment. This is especially helpful for newer businesses that are trying to keep from incurring any new debt.

 

  1. Fast and Easy Funding

 

You can get approved for this kind of financing more quickly than traditional financing methods. Moreover, once you sell the invoice, you get paid within a matter of days, making this a much simpler, faster solution for immediate financial needs.

 

  1. Discounts Available

 

There are discounts for early payment as well as discounts for volume. With the better cash flow you experience from AR factoring, you’re freed up to get these discounts if you want, opening up your opportunities in the long run.

 

  1. Mitigated Collection Responsibility

 

When you sell the invoices to the third party factoring company, you no longer have to reach out to your client for payment. There’s a lot of time, hassle and cost associated with this responsibility, so when you pass this on to be factored, you have that time and money to use for growing your business.

  1. Faster Invoice Payment

 

The factoring company you hire often reports back to credit companies. So if the factoring company has difficulty collecting payment from one of your customers, the credit bureau may hear about it. Your customers don’t want to hear from the credit bureau, so they will often pay back their invoices early. This benefits you, because though you receive cash when you sell the invoice, you don’t get the full amount back until the customer pays it.

 

In short, factoring invoices is a great way to save time and get paid faster. If you’re looking to grow your small businesses, this financing is well worth your time to research.