How Invoice Factoring can Transform Your Business Finances

How Invoice Factoring Can Transform Your Business Finances

Your cycle for invoicing and collecting payments works well for your customers. However, receiving payments between 30 and 90 days after selling inventory is a drag on your business, crimping day-to-day operations and keeping you from expanding.

Invoice factoring can open the funding spigot and give you the cash flow you want to move your business to succeed and grow.

Barrington Commercial Capital customizes funding strategies that empower companies to pursue their business goals without worrying about the cash crunches many businesses experience. You can talk to a financial professional at Barrington Commercial Capital about getting the cash flow that is the lifeblood of your business.

Here is a look at invoice factoring.

What Is Invoice Factoring?

Invoice factoring is taking invoices you’ve already sent to your customers for goods or services they’ve received and selling those invoices to a factoring company. In the exchange, you get 70% to 90% of the value of your invoices up front, immediately increasing your cash flow.

It’s a sale, not a loan. There is no hard check on your business credit, and you don’t have to have good credit for invoice factoring. You also don’t have to be concerned about paying back money. Invoice factoring is an alternative funding strategy that gives you more timely access to the value tied up in invoices customers pay regularly.

Businesses of all sizes use invoice factoring to provide cash flow. You might have heard the term invoice factoring being used interchangeably with accounts receivable financing. The two funding mechanisms can infuse a business with the cash it needs, but accounts receivable financing isn’t as flexible as invoice factoring.

How Does Invoice Factoring Work?

Invoice factoring is fairly simple. You review your invoices for customers in good standing and sell those invoices to Barrington Commercial Capital, a factoring company. This is how the transaction unfolds:

●     The factoring company verifies the invoices and pays you 70% to 90% of the value of the invoices

●     The factoring company collects payments from your customers through transparent communication

●     The factoring company receives the payment, takes out its fee (typically one to five percent) and returns the remaining balance to you

Your company has the money it needs for payroll, daily operations, equipment purchases, expansion or whatever you want to do with the money.

The Pros and Cons of Invoice Factoring

Businesses have many ways of funding their necessary activities, and they all have their pluses and minuses. Here are the pros of invoice factoring:

●     Quick access to cash

●     Easier approval than a bank loan

●     No impact on your credit score

The cons of invoice factoring include:

●     Reduced profit margins

●     Need to compare fees and rates

●     Customer perception

To ensure your business gets the capital it needs to operate, you must vet the factoring company you work with to avoid any hidden fees that could cost you and your business.

Find the Capital Financing Your Company Needs

Now that you know the basics of invoice factoring, consider learning more to get the operating capital needed in your business. At Barrington Commercial Capital, we understand your business needs capital to grow and succeed. We have funding strategies that can help. Get in touch today.

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