Invoice Discounting: What It Is and How It Can Help Janitorial Services Companies
 Invoice discounting is an excellent way for businesses to leverage their accounts receivables so that they can raise money. Businesses in every industry experience cash flow problems. This is especially true in today’s economic climate. These present, tough economic times are putting a significant amount of pressure on businesses. They are finding it more difficult then ever to stay afloat.
Today, cash flow problems are not easily remedied with a bank loan. Instead, businesses are being forced to look into alternative methods to raise money. Invoice discounting is an excellent, alternative option. For janitorial services companies, this is an ideal way to finance future jobs, purchase supplies or simply keep the lights on.
Invoice discounting is a term that can be used interchangeably with invoice factoring. Both involved businesses selling their invoices at a discounted rate for fast cash. Most companies will sell their invoices at a 10% to 30% discount. These monies are paid in cash and can be used for whatever a company decides to use them for.
Besides the luxury of being able to access money when needed, a company is also able to benefit from the collection services of a Factor. A factor will collect on the invoices they purchase, according to the terms already agreed upon between the company and their client. This helps to streamline the process and also decreases the likelihood of potential problems developing.
After a Factor has collected on the invoices they purchased, they will return the money to the company that originally owned them. They are paid a pre-set fee for their services. This fee typically falls within the 3% to 5% range.
For companies that are unable to receive money via traditional bank loans, invoice discounting (invoice factoring) is a great way for them to get the money they need to keep their businesses afloat and even to expand.
Janitorial services companies can sell their invoices and use the monies to hire personnel, purchase supplies and simply to function. Because janitorial services often send their clients an invoice, they are always at risk for developing cash flow problems. They may not be paid for jobs they have already completed for 60 days. This can be quite problematic and make it impossible for a commercial janitorial company to take on new clients or to pay their bills. In many cases, this can be solved with invoice factoring.
One of the biggest advantages of invoice discounting is that it is not dependent on the credit worthiness of the business selling their invoices. Instead, it is only important that a company’s clients have good credit. A Factor is repaid after they collect on a company’s invoices. Therefore, they are extremely concerned about the credit worthiness of a company’s client.
Invoice factoring can be a fantastic option for janitorial service companies that have average to poor credit or those that have not been in business very long. These types of companies are often unable to receive traditional bank financing. Invoice discounting is one way for them to get money when they need it, without resorting to taking out a loan.
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