1. Immediate cash and quick access to working capital
The most valuable part of factoring gives you working capital fast, which allows you to close the gap on your cash flow needs. By having available cash flow, it allows you to make payroll and pay expenses and take advantage of business opportunities without waiting 30-60 days for your customers to pay.
2. Flexibility and unlimited growth
By having a factoring line, it gives you the flexibility to use it as much or as little as you need for your business. If you do not use it, you do not pay any fees. Additionally, as the company grows, so does your factoring line. This allows you to have continual access to capital. Lastly, factoring can also be a short-term or long-term solution depending on your industry and business needs.
3. Quick set-up
The underwriting process connected with traditional bank financing can be very time consuming; whereas with factoring, a factoring line can usually be set up within 3-10 business days.
4. Easier approval and higher credit limits based on your client’s creditworthiness
Factoring companies primarily look at the creditworthiness of your customers for repayment. Factoring is a great option for companies with recent losses, just starting, customer concentrations, seasonality, or rapid growth.
5. Collateral is the invoices themselves
Many factoring companies take only your invoice receivables for collateral instead of a blanket lien on all your assets, which can include real-estate, inventory, equipment, etc.
6. Outsource tasks/manage credit risk for your customers better
Many factoring companies help conduct credit checks and analysis as well as keep records of accounts receivable and provide reporting. This allows a business owner to know who they are doing business with and hopefully lead to fewer bad debts. It also allows a business owner to better focus on the responsibilities of their company.
7. Allows you to retain all your equity.
When a company gives up equity, they also give up a portion of their company and control. Additionally, if selling equity during financial distress, the company is most likely not getting the best price.