Why Use Factoring?
Businesses often face difficulties when they extend terms to clients but still need to handle ongoing expenses. While waiting 30 to 60 days for their customers to honor their accounts receivable for products delivered or services rendered, companies continue to have to purchase inventory, carry on marketing efforts and pay their suppliers, employees, and taxes. One solution to this dilemma is factoring. Here is some information about this funding method that will help you determine if it is right for your business.
Boost Company Cash Flow
Factoring strengthens your cash flow while you wait for customers to pay. Upon approval of your application, you immediately receive 70 to 90 percent of the value of the unpaid accounts receivable. The rest is sent to you, minus the factoring fee, when your clients complete payment. This ensures that you can cover all your expenses.
Qualify for Funding Easily
Factoring is available to startups and smaller companies that may not be able to obtain other forms of funding. Even if your credit is imperfect you can qualify for factoring because the financing company is more concerned with the credit ratings of your customers. Industries that often benefit from factoring include construction, transportation, wholesale, manufacturing, distributors, and many more.
Receive Alternative Financing
Most businesses first look to traditional financial institutions for lines of credit or loans. However, it is difficult for many companies to qualify for these. Factoring offers you an alternative form of funding that is easier to reach.
Recover from Troubling Circumstances
Companies experiencing troubling financial situations find it almost impossible to have funding approved from a bank. Factoring provides such businesses with a means to turn their circumstances around and once again achieve profitability. Even companies that have experienced a bankruptcy can find a way to endure and thrive with the assistance of factoring, as long as they and their clients meet the basic qualification requirements.
For more advice on funding your business through factoring, contact TCF Capital.