Invoice Factoring: A Quicker Solution for Acquiring Capital Without Taking on Debt
While every business owner dreams of improving their business to a certain level, one of the biggest obstacles to achieving that dream is delayed access to funds due to unpaid invoices by customers.
Though your customers’ delayed payment is sometimes justifiable, the repercussions of the delay are often huge, sometimes paralyzing some operations of your businesses.
But you don’t have to suffer when quick access to funds is within reach, thanks to invoice factoring, which lets you access funds within just a few days.
The quick access to funds is necessary, especially now when many businesses struggle to access funds, thanks to the pandemic.
Invoice Factoring: Definition
Invoice factoring refers to selling your unpaid invoices (account receivables) to an invoice factoring company, which then provides you with the cash you need to run your business. The account receivables must not be older than 30 days, however, at Moby Capital, we can accept receivables older than 30 days.
Invoice Factoring: How It Works
Once you provide goods or services to your clients and send them an invoice, you provide a copy of the invoice to your factoring company. If they approve the invoiced customers’ credibility, your company gets up to 90% cash advance needed for the business operations.
While you would wait for up to three months (or even more) to receive your customer’s payment, it takes the factoring companies only 24 to 48 hours to credit your account. However, the amount you receive depends on the factoring agreement, as shown below:
• Non-Recourse Factoring: Here, the factor assumes most of the risk of your customer’s non-payment. It has a higher fee structure hence often avoided by businesses. Due to the higher risks involved, non-recourse factoring usually has more stringent requirements. For example, factors may not accept invoiced customers with bad credit ratings. In some cases, the non-recourse only applies when the debtor becomes bankrupt.
Why You Should Consider Invoice Factoring
Your business can benefit from invoice factoring in many ways, as shown below.
Offer Instant and Steady Cash Flow for Smooth Operations
Other alternative financing options like loans may take months before approval. Invoice factoring gives instant cash, allowing your business to operate effortlessly.
Greater Chance of Financial Approval
Many lenders will first check your credit score, collateral, and financial history before considering giving you cash. You don’t need all those in invoice factoring because your invoiced customer’s payment history is just enough.
Provide Financial Flexibility
Imagine not being able to pay your employees on time because several customer invoices are still pending. With instant access to cash, you don’t have to wait till all invoices get paid before there’s money in the account, meaning you’ll never pause business activities due to inadequate funds.
Saves You Money and Time
Your bank may not give you a loan without upfront collateral (buildings, vehicles, equipment, and so on). Since you won’t need to show collateral in invoice factoring, you save lots of time and paperwork. Also, you don’t waste time collecting money from your customers.
Good Customer Relationship
By lifting your shoulder off the time-consuming task of collecting money from your invoiced customer, your business can improve other aspects of the company, including strengthening the business-customer bond.
Get Quick Access to Invoice Factoring
Are you tired of waiting 30 to 120 days before receiving your customer payment? Wait no more.
At Moby Capital, we know that your business needs instant cash to run its operations effortlessly. That’s why we provide fast, easy business funding of up to $5 million to help companies meet their goals.