Accounts Receivable Factoring: Is It Right For Your Business?
 Factoring can be a great tool for your company. It can help your business get the monies needed to keep the business afloat or to take advantage of opportunities to expand. While it obviously is not the best choice for every company, it is for others. Below, we will discuss scenarios where accounts receivables factoring might be an option that makes sense.
Are you a new business?
New businesses may be cash poor. Having the ability to quickly obtain funds can make or break the company. Often times, new businesses are not able to secure bank funding and so they have few options when it comes to raising capital.
Selling their accounts receivables can be a fantastic way to raise money without taking on debt. The last thing that a new company wants if it can be avoided is a great deal of debt. It puts the business at risk and makes it much more difficult to show a profit, which inhibits its ability to borrow cash in the future.
Are you looking to grow your business quickly?
Invoice factoring can speed up the growth process of a business. The money they receive from selling their invoices can be used to pay for additional needed inventory or to start a completely new product line. Because they are able to get money quickly, they can re-invest it into their business really quickly. This can result in accelerated growth
Are you having cash flow problems?
Cash flow problems can stifle any business. If your company seems to be stalled because you are having a difficult time collecting on outstanding invoices, factoring can provide your business the money that it needs right away. This allows the company to get on with operations and making money.
Is it difficult for you to get a bank loan?
If your company is not in a position to get a bank loan, factoring may be one of the few options that is available. Companies with few assets to use as collateral, are fairly new and/or have not yet turned a profit, may not be eligible for a loan, at least not one with good terms.
In these cases, it might be best to find a factor that will be willing to give you a hefty percentage of your outstanding invoices (75%-90%). This gives your company the money that it needs right away, without the hassle of having to try to qualify for a loan.
Also, because you are selling your invoices, you don’t have to worry about paying anything back. This type of transaction can strengthen your company and not cause further strain because there are no worries about how or whether or not the loan can be repaid.
Factoring accounts receivables might be great for our particular company. If you are a start-up or are fairly new and are looking to grow your business quickly but have cash flow problems and have found it difficult to get a loan, factoring may be a really good option.
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