Accounts receivable factoring, alternatively known as invoice factoring, provides an effective solution for businesses that require working capital while waiting for customers to pay outstanding bills. You sell your unpaid invoices to a factoring company, which immediately provides you with an advance of 80 percent or more. As soon as your clients pay in full, you receive the balance after the factoring company deducts its financing fee. Here are some considerations as you decide whether invoice factoring will suit your company’s needs.

Qualify Easily

Traditional bank loans are difficult to qualify for, especially if your company is new and does not yet have a credit history. In contrast, you can qualify for invoice factoring even if your credit score is not high. Factoring companies are more concerned with the credit scores of your customers than your own.

Build Credit

Factoring involves the sale of unpaid invoices, which is not the same as a loan. This means that using this method of financing does not negatively impact your company’s credit score. In fact, factoring strengthens your cash flow, allowing you to pay your creditors on time and as a result raise your credit score.

Obtain Working Capital for Growth

It can be frustrating when you are offered significant projects but lack the working capital to accomplish them because your funds are tied up in unpaid invoices. Through accounts receivable factoring, you obtain the financing to accept the work that will help your business prosper and grow.

Survive Slow Times

Many businesses experience occasional downturns in work. For some, this is due to seasonal considerations. Factoring your invoices gives you the working capital needed to carry your company from slow times to the next prosperity boom.

Receive Funding Without Limits

When you factor your accounts receivable, your company’s growth is not limited to the payment cycles of your clients. Instead, you have the working capital to purchase inventory, materials, equipment, and other needs on an ongoing basis. Additionally, unlike a loan, which provides you with a one-time fixed amount of funds, your access to invoice factoring can grow along with your business’s sales.

For more advice on improving working capital for your business through accounts receivable factoring, contact KMS Funding.