Many small business owners have heard of factoring financing, but they are not quite sure exactly what is a factoring company. Sometimes terms are used interchangeably to describe what is a factoring company and what they do which can add some confusion to the mix. For example, you may have heard of an invoice advance loan or invoice factoring services.
If you ask small business owners what a factoring company is, you may get responses like “they helped me keep my business open” or “they helped me expand my business”. All are true statements, but it still does not tell you what a factoring company is. Keeping reading to learn what is a factoring company and how it can help your business.
A factoring company will meet the needs of a wide range of small and medium-sized businesses that need working capital to keep flowing while they are waiting on invoices to be paid. Factoring financing is a simple solution to your bridge the gap in your cash flow.
Do not confuse a factoring company with a loan company. They are similar but not the same. When you apply for a small business loan you are looking at weeks of paperwork, meetings, and potentially hearing a no at the end of the process.
An invoice advance loan is based on your receivables. You are selling your future income. Instead of waiting on customers to pay the invoices, you sell your receivables to a factoring company. You get your money immediately instead of waiting on receivables to trickle in.
Different Service Areas
There are factoring companies that focus on different industries. For example, there are trucking factoring service factoring companies, freight invoice factoring companies, even international factoring service companies. Some factoring companies offer a comprehensive service option that includes several different industries while others focus solely on one specific industry.
Invoice factoring comes with a wide range of benefits for any type of industry. Not having to wait for receivables to be paid helps to keep your cash flow positive. Having the capital that you need can mean providing more services to customers, expanding your business, and having the power to offer customers better terms on your invoicing.
It is Worth Learning About
If you are a small business owner and you are looking for an easy way to raise working capital you should learn more about what is a factoring company and what it is not. You may be surprised to find that this is the perfect solution to your cash flow needs.