why use it?
Companies may choose to use an invoice factoring company for several compelling reasons. One of the main reasons is to improve cash flow. Instead of waiting 30, 60, or even 90 days for customers to pay their invoices, businesses can get most of their money right away by selling those invoices to a factoring company. This immediate access to funds allows businesses to cover daily expenses, pay employees, and invest in growth opportunities without the stress of cash shortages.
Another reason is that invoice factoring helps businesses manage their finances without taking on new debt. Traditional loans require businesses to pay back the borrowed amount with interest, adding to their liabilities. In contrast, invoice factoring is not a loan; it’s simply a sale of accounts receivable. This means companies can get the funds they need without adding debt to their balance sheet, which can be a significant advantage for maintaining a healthy financial position.
Invoice factoring also saves businesses time and effort in managing their accounts receivable. Chasing down payments and managing collections can be time-consuming and divert resources away from core business activities. Factoring companies take over this responsibility, handling the collections process and ensuring that payments are made. This allows business owners and managers to focus on what they do best—running and growing their business.
In addition, using an invoice factoring company can provide businesses with more predictable cash flow. Knowing that they will receive a substantial portion of their invoiced amount immediately, businesses can plan and budget more effectively. This stability can be crucial for making strategic decisions and responding quickly to new opportunities.