If you are in the process of choosing a financing solution for your business, you may be wondering why so many companies factor their receivables. In today’s post, we discuss some of the most common reasons why businesses like yours choose to factor their accounts receivable.
Factoring Helps Companies Get Paid Faster
To put it another way, factoring accelerates your cash flow. The factoring process consists in selling your unpaid invoices to a factoring company, which pays you upfront and then collects the payment from your customer in exchange for a small fee.
This simple process helps businesses remove the need to wait 30 to 90 days to get paid — not to mention the hassle of dealing with slow-paying customers.
Some benefits of good cash flow management include:
- Pay your obligations (debt, payroll, etc.) on time
- Improve your credit score
- Take advantage of early payment discounts
- Have cash on hand to purchase the raw materials you need when you need them
Factoring Is Efficient
When you run a business, time is money. Every minute you spend seeking financing or figuring out how to meet the stringent requirements of banks is a minute you can’t spend taking care of your business.
That’s why receivables factoring is a favorite of companies across the board. Factoring is a simple, flexible process that allows you to get the capital you need when you need it. For example, while getting approved for a bank loan can take weeks or even months, approval for factoring takes hours if you choose ACS Factors.
Receivables Factoring Helps Companies Avoid Debt
You probably have heard that everyone is talking about high interest rates these days. In a nutshell, high interest rates mean that you have to pay more money to the bank if you take out a loan, so this isn’t the best time to go into debt.
Businesses love factoring because it allows them to get capital without incurring debt. You can choose which invoices to factor and when, making it really easy to increase your funding limits.
This way you get the cash you need without compromising future revenue, or even the continuity of your business.
Non-Recourse Factoring Shields Companies From Bad Debt
Non-recourse factoring is a type of receivables factoring that offers even more benefits to your company.
With regular recourse factoring, you have to pay any receivables that your customers are unable to cover. But with non-recourse factoring, the factor is responsible for any invoice that goes unpaid. Yes, you read that right: with non-recourse factoring, the factoring company absorbs the risk of non-payment.
This means that, in addition to giving you flexibility and accelerating your revenue, non-recourse factoring also shields your company from bad debt, which is one of the most common (and serious) threats to your cash flow.
ACS Factors: We Turn Your Invoices Into Cash
We are a Factoring company located in Upland, California, with many clients nationwide in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.
Contact us today by email (email@example.com) telephone (909-946-5599), or through our social media accounts on Facebook, Twitter, and YouTube, and start enjoying the convenience of converting your accounts receivable into cash today!