Small businesses often struggle with having enough cash flow to sustain the business. Invoice factoring is a helpful way to keep up with the amount of cash owing to your business, especially when you need cash as soon as possible.
Basically, an invoice factoring solution is when a third party (a factoring company) can buy your invoices in exchange for a lump sum of cash. Then, the factoring company owns the invoices and they get paid when the late invoices are paid. Instead of waiting for your payment through invoices, you receive immediate funds to continue the business running. Most of the time, businesses will receive 80% of the invoice value immediately. Depending on arrangements, the collection of invoices can be managed by the factoring company.
For instance, your product is sold to a customer for $5,000, however they agreed that the invoice be paid within in 30 days. You have urgent fees, wages and expenses to pay tomorrow. Invoices that you are waiting for can be bought by a factoring company at a discounted price for immediate cash. For instance, if it was discounted the business will receive 80% of the invoice value. In this circumstance, the business would receive $4,000.
There are numerous benefits to businesses that choose invoice factoring. Some include:
• Bridging the gap between slow payments
• No waiting – have immediate cash flow to keep your business going
• Be ahead of ATO obligations
• Use early repayments to grow your business
• No collateral, credit store and loan history
• Easier to receive than business loans
At Lending Connect we offer the best advice for your situation. Depending on your business needs, we will find a solution tailored specifically for you that will achieve your objectives. We ensure to connect you to the right lender that suit your business goals and values. The Lending Connect Team are dedicated to their clients and are always on your side when it comes to invoice factoring, making sure your business keeps up cash flow.