What Is Invoice Factoring For Small Business?
Invoice Factoring is where you sell your outstanding invoices to a third party and allow them to collect payment on said invoices. This is not the same as Invoice Discounting, which is where you borrow against the invoice and you still collect the payment before paying your Invoice Discounting partner.
The Benefits Of Invoice Factoring
The major benefits of Invoice Factoring for your small business are as follows:
- You can collect payment of your invoice within 24 hours.
- Your small business could be protected from bad debt. Meaning if your customer goes bust, you can keep any payments you collected via factoring.
- Improved cash-flow due to the fast nature of invoices being cleared.
- The ability to grow your business faster due to faster invoice payments.
- Your business can take on large contracts with long payment terms. Without the worry of how you will sustain your business while waiting for the first few invoices to be paid.
The Disadvantages of Invoice Factoring
The main disadvantages to a small business using Invoice Factoring are as follows:
- Your clients and customers will know you’re using an Invoice Factoring company.
- You’re not in control of the debt collection process of outstanding or overdue invoices.
- You will pay a fee on every invoice you sell via factoring, which may reduce your small businesses valuable profit margins.
- A business loan to cover one invoice may offer a cheaper alternative
How To Choose The Best Invoice Factoring For Small Business Deal
There is a best invoice factoring partner for every type of small business. If your small business is in the trades, haulage, marketing, retail, or manufacturing, there is normally an invoice factoring partner best suited to your circumstances and SIC code.
Your Lendus consultant will listen carefully and discuss the benefits of each Invoice Factoring options before letting you know which option we think may be best for your business. To make a start contact us via any of the methods in the sidebar.
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