Updated: Feb 13
One of the most common problems many small businesses confront in balancing their need to pay and receive payments on time. The need for full payment collection is what makes many businesses rely on different financing solutions. While big businesses have many resources when it comes to negotiating on-time payments, small businesses usually do not have this option unless they are a unique brand proposition. If you run a company that often struggles to figure out the right balance, it is important to consider your cash flow gap and the best options to close it. One way you can maintain this balance and can help your business make better payment terms. All you need is to find a reliable factoring company such as Porter Capital. The reputed company offers some excellent and comprehensive financing solutions regardless of what type of business you have.
What is Invoice Factoring
Technically, invoice financing and factoring is not a traditional loan. The innovative financing method works when businesses sell their invoices at a fixed discounted rate to a factoring organization. This exchange is for a required amount of cash businesses need to run its operations or to invest. The factoring company owns those invoices. They receive payment when customers make the due payments, which typically take 30 to 60 days. For instance, you run a hardware store that sells goods to different clients and businesses. Your store creates approximately $10,000 invoices. Your customer agrees to pay off all invoices in thirty days. However, you require immediate cash to pay your staff. This is where you need a finance solution to overcome a cash shortfall.
Although you can opt for a traditional loan from a bank, it would likely require your stellar credit, physical asset, including real estate. They can sell these assets if you fail to pay back the amount. In addition, even if you qualify for that, but it may take several months for your loan to release as it involves long paperwork. The success of invoice factoring mainly depends on the invoice factoring company you choose. Factoring companies like Porter Capital offers benefits like:
Improved Cash Flow
Invoice factoring improves your cash flow by reducing gaps. Not only does it help you grow business, but it also keeps your potential customers on the long payment terms.
By providing businesses immediate cash or working capital, Porter Capita can help your business cover a large funding gap caused by your slow-paying customers.
Porter Capital provides working capital to companies that are difficult to get from other resources like banks and other financial institutes due to poor credit limits or operating history. Porter Capital only cares about the creditworthiness of the customers and invoices they are looking to factor with the business.
How Invoice Factoring Can Help Businesses Make Better Payment Terms?
Invoice factoring plays a vital role when it comes to making better payment terms for businesses. To make the most of this feature of invoice factoring, it is important for entrepreneurs to determine the payment wait-time and compare it to the due time of expenses. For example, if a business payment terms are 90 days, and the customers are taking more time to pay, there can be a significant gap in cash flow that may prevent entrepreneurs from making successful profits. It may also disturb the current operations of the business. The good news is that invoice factoring can help businesses close this gap. Although it is critical to close this gap, businesses do it in a number of ways:
They accept small payments to speed up their turn around
Apply for a traditional business loan to reduce the gap
Factor the invoices to offer better payment terms
Two of the above options are pretty self-explanatory and can be unrealistic for many businesses except the third one. If businesses offer discounted prices on prompt payments, the capital money might not be sufficient for covering the cash flow it needs.
On the other hand, seeking traditional business loans may not be a feasible option every time due to insufficient credits and tough collaterals to qualify. The underwriting involves in these processes may take weeks, and many businesses cannot afford it. Invoice factoring, however, is a unique and viable solution to these problems. Moreover, it is because when a business factors its invoices, it receives approximately 95 percent of payment within 24 hours. The remaining amount is paid once the customers collect the full payment.
Hiring factoring companies like Porter Capital makes such processes eve more hassle-free and streamlined. The company does not take more than three business days to provide the working capital to the businesses. In addition, businesses can qualify regardless of their size and credit scores. Not only is this, the factoring charges associated with transactions are significantly low as compared to the interest charges on any small business loan. Entrepreneurs can control the factoring cost by the factoring invoices they absolutely need. Besides this, they can offer easy extended payment terms to their customers without having to sacrifice the financial well-being of the company.
Porter Capital, in this regard, works with a flexible and easy-to-manage mechanism of invoice factoring. That makes invoice factoring extremely easy for all types of businesses working in different industries. It makes a reliable source for fledgling and small businesses when they need an immediate cash infusion. Having quick access to cash flow allows businesses to purchase inventory, pay employees or bills, and make the most of various new opportunities.
Invoice factoring, without a doubt, is one of the trusted options for both startups established businesses. Fluctuating cash flows can be a big problem for any size of business, especially if their revenue and profits are seasonal. Invoice factoring not only smoothes out the unstable cash flow but offers better payment terms to small and large corporations to deal with seasonal revenues and ebb. Therefore, contact Porter Capital for all easy and comprehensive cash flow problems by filling out the form on our invoice financing loan application page.