Any business owner knows that finances just don't run smoothly all the time. If you have a number of clients who pay on an invoice basis, you may find that there are weeks or even months when you don't have much income. Having all that income outstanding when you desperately need cash for your business expenses can be frustrating. However, there may be an ideal answer in the form of factoring, also commonly called invoice factoring.
The Value of Factoring
The invoices that your company currently holds can be worth money if you work with a factoring company. The good thing about selling your outstanding invoices is that you don't have to spend a great deal of time waiting to get the money that you need today. The cost of selling your invoices for cash can vary widely, which is why it is so essential that you work only with highly reputable companies.
The Process of Invoice Sales
The process of invoice factoring company is really a quite simple one. Your company needs only to assemble all the outstanding invoices and make a rough calculation of how much money is currently owed to your company. If you need all of this money you can request virtually the full face value of the invoices, however many people prefer to request only as much as their company currently needs to continue operation. The invoice buyer will typically cut two different checks for you during the sale. First, you will get a check for around half of the total invoice value. Once the buyer has collected the outstanding invoices, you will get the remaining amount due to you.
The Cost of Invoice Sales
The amount that the invoice buyer will pay in total for the invoices may be nearly face value. However, it may be only slightly more than half of the total face value of the invoices. While you won't receive quite as much cash from selling the invoices as you would by waiting to collect them, there are some big advantages to selling the invoices. The main benefit is that you are able to get the money exactly when you need it instead of waiting for a long time. Another significant benefit of selling your invoices is that your company won't have to undergo a credit check to get the necessary money. Credit checks can not only be difficult to pass, but they can also take up far too much valuable time. Selling your invoices can be the fastest and most efficient way to get cash you need.