Service providers lacking sufficient capital to grow their businesses are often left behind in an evolving economy. Many small business service providers tend to operate from invoice to invoice, with limited resources to invest in new projects. When payments are finally received, they are typically used towards expenses that took place months prior, including payroll, marketing and other overhead costs. Due to this, most types of service providers are never able to realize their profits from operations.
How Invoice Factoring Can Help
As a financing option, invoice factoring can easily solve this issue for a number of reasons. Since no credit qualification is required to establish a factoring account, the factoring company relies instead on the creditworthiness of the invoiced customers. The business sells their invoices to a factor, which then advances a percentage of the value of the invoice to the business. The factor can accelerate payments weekly or monthly so that businesses can better plan ahead for seasonal changes in cash flow. Invoice factoring accommodates the business’ needs; as sales grow, so too do the advances. Payments can be received within days of invoicing rather than having to wait.
Invoice Factoring: How it Works
The steps are straightforward: The business establishes an invoice financing account with a simple application and without a credit qualification. This process takes just a few days, and upon approval of the account, the business submits a copy of an invoice to the factoring company. Once they verify the invoice, 80% of the invoice value is advanced to the business via direct deposit within a few days. The factoring company then proceeds to collect payment on the invoice under the original payment terms. After payment, the balance reserve is paid by the factor to the business. With an accounts receivable factoring account, the business may continue to submit invoices for cash advances as often as necessary.
Invoice Factoring for Call Centers: The Ideal Solution
No service provider is immune from seasonal changes, and invoice factoring is a great solution to alleviate the cash flow gap. As an optimum financing option, small businesses can always have sufficient resources to cover ongoing costs while remaining financially prepared for the next big opportunity.