There is a very often repeated misconception in small business circles about the use of factoring financial services. This misconception leads business owners to believe that factoring is only used by businesses that are in trouble financially.
As a point of fact, this is the opposite of the type of business that uses factoring financial services. Factoring allows a third-party company, the factor, to advance up to 80% of the cash for accounts receivable. This means that the business has to be generating revenue and providing work for customers in order to qualify for the funding option.
Successful small to mid-sized businesses across the country tap into the value of factoring. The three most common reasons that these top performing companies use factoring focuses on the ability to take advantage of opportunities to continue to be a success.
Growth and Expansion
By avoiding cash flow gaps between completing contracts and payment, a company is always poised when growth and expansion potential presents itself. By having cash on hand, it is possible to replenish inventory, buy new equipment, take on new contracts and expand into new markets without all the complications of a bank loan or line of credit.
Hiring Quality Professionals
A very smart way to use factoring financial services is to be able to hire quality individuals when they are available. This is true in any industry, but it’s particularly important if you are operating a service industry or operating a staffing agency, security company or other similar business.
Managing Cash Flow With No Business Debt
A very smart way of thinking about factoring is the ability to have cash on hand for work completed without anything showing on the company profit or loss sheet. This is important if you will need to apply for credit in the future, want to sell your company or are looking for investors. As factoring is not a loan, it is also not debt, and will not count against your business in any transaction.
