Factoring is a financial practice whereby a company sells its accounts receivable to the lender, known as the factor. The lending is usually short term and is available for businesses that supply goods and services to other companies or the government. Invoice factoring improves cash flows, facilitates business growth and provides financial independence for the borrower. If you intend to use this financing method, keep reading to know the right time when you should use factoring.

When You Need Fast Money

Factoring is the best option if you have a business emergency that needs quick money. The value of your customer invoices will help you get the cash you need, instead of waiting for the slow-paying customers to settle the debts. Your factor can offer you the funds within 24 hours.

When You Need a Straightforward Approval

Traditional banks and other financial institutions have a lengthy loan application process, which often includes a lot of documentation. Besides, the institutions require you to have an excellent credit rating to qualify for the loan. If you do not qualify for the traditional loans, try invoice factoring. Your customers, however, should have a good credit history.

When You Need to Grow Your Business

Invoice factoring supports growing businesses by offering them quick funds based on the value of their invoices. A company can use the money to purchase materials, hire employees or carry out any growth-related business activity. Some factors offer business growth advice, and can, therefore, help you grow your business well.

When You Do Not Want to Have Additional Debts

Borrowing money from banks means that you will incur additional debts, which might keep on accumulating if you fail to pay. On the contrary, factoring usually allows you to get an advance of the funds that your business owes your clients. The invoice fee is usually low; hence it does not cause adverse effects to your business.

When You Have Cash Flow Problems

Every business experiences seasonal ups and downs. You may not always plan well for the downs period, but invoice factoring can help you sustain your business during that period.

Invoice factoring is ideal for all businesses that need to grow with a debt-free future. It can be a great option if you need fast money to settle your emergencies, or when you need a straightforward approval. You can also rely on it if you are experiencing cash flow problems in your business.