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How to solve cash flow problems, with invoice factoring

cashflow19162760.jpg Many businesses experience a number of cash flow problems as their customers do not pay on time and they end up struggling to pay their vendors as they have to money. Cash flow problems can lead to so many issues that it can be frustrating for small business owners to survive. If you are sick of struggling with your cash flow problems and you would like to feel comfortable with your business for a change, invoice factoring may be the solution you are seeking.

What exactly is factoring? It is when you sell off your credit-worthy accounts to a factoring firm in exchange for cash now. This is a great way to avoid having debt as you are able to have the money you need right away. You can only borrow up to the amount of 80-90 percent of your invoice total. However thanks to factoring, you have all the money from your invoices now and there is no waiting for the money to come in.

There are a number of businesses that turn to factoring when they are unavailable to afford a loan or other financing options for their business. You don't need a credit check or any type of traditional lending factors in order to be approved for the factoring financing options. The one key is that the factoring firm traditionally likes to see companies that work with individuals with high credit ratings. This is because these individuals tend to pay their bills and there is a lower risk that the lenders will have to worry about collection problems when it comes to invoice factoring.

Since most businesses have a 30-45 day wait on their invoices, it makes it very challenging to get your bills paid on time. With invoice factoring you no longer need to wait around for all of your customers to pay their bills and you are able to have cash flow money right away.

With the factoring company option you will end up invoicing the firm and they will handle the collection of invoices from your customers. How much will you be able to receive from the factoring firm? They typically offer about 80% up front of the face value for the invoice. Once all the money has been collected from the customer they will be able to provide you with 10-15% percent more. How quickly will you receive the funds? Most factoring firms will provide the money to you in about 12 hours but some may need 48 hours as it has to clear the bank.

The discount fee is the cost of working with the factoring company. It varies with the different invoicing companies you are able to work with but for most you will expect about 10% of your invoices. However if there are issues with other things like late payments and market growth, the fee may increase.

It's beneficial to have the factoring firm deal with the collection process as this can take away a lot of stress and time that you just don't have. Instead they will not only collect the funds but they can also perform credit checks on new customers and many other benefits.

Before you start shopping for a factoring company you do need to make sure you have some things in proper order. This includes having your business license up to date, creditworthy invoices, and no liens on the company.

You may need to adjust prices of your products if the cost of the factoring firm is very expensive. The costs can be overwhelming so adjusting your prices is a great way to make them affordable.

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