Running a small business requires lots of dedication. You have an obligation to have enough cash flow to ensure that you can run your daily activities. It is stressful for a small business person to wait for a period of 30 to 60 days to get paid by a client. This is a problem to small business owners since they have limited resources, and bills to pay.
It is advisable for small business owners to work hand in hand with invoice factoring companies to help them maintain their cash flow. The factoring will enable you to sustain a sufficient cash flow and also to keep your clients.
Are You Eligible for Invoice Factoring?
Not all small business persons qualify for the factoring. But here is some guide that will enable you to know if you are qualified.
1] What is Your Credit Score?
A good credit score will fetch you both secured and unsecured loan. Ensure that you clean up your score to attract the lenders. A small business owner might have a bad credit score. But that should not prevent you from acquiring the cash. Lenders understand the dynamics of the business world, especially to the upcoming entrepreneurs. The factoring company will require you to have a credit score of 530 as the minimum threshold. It will, therefore, make you eligible for the funding.
2] Do You Own a Business to Business Company?
The Business to Business companies typically works with the invoice factoring companies. The amount funded by the company will qualify with the factoring regarding the outstanding invoices.
3] Do Your Clients Have Good Credit?
For your business to be suited for factoring, you need to have customers who have longer repayment terms under their contracts. You can leverage the credit worthiness of your clients even if you have a good or a bad credit score. It will enable you to qualify for the factoring.
Advantages of Factoring invoices to the small business owners.
1] Improves Cash Flow
One of the major benefits of the factoring invoices is the ability to improve the cash flow. Small entrepreneurs find it hard to maintain a sustainable cash flow. The factoring invoice ensures that you have sufficient funds on hand to cover basic business expenses.
2] Easier to Obtain than Business Loans
Factoring funding is easier to get than getting a business loan. It is simple to apply, and the process is less tiresome. The most required item is to have is clients who have good credit score. It is, therefore, necessary to ensure that you have good customers that have exceptional creditworthiness.
3] Flexible Terms
Unlike obtaining loans, Factoring invoices don’t have long-term contracts. It is within your ability to choose and decide how long you want to factor the invoices. The more your sales increase so does the factor funding increases.
4] Minimizes Bad Debt
Small business owners face challenges of having sufficient funds to run the business activities. Sometimes the clients might fail to pay on time. The factoring company can act as a credit bureau. It is crucial especially when you want to grab some business opportunities, and you are uncertain of the credit prospects.
5] It Can Be Deployed Quickly
Factoring invoice can get financed within five (5) to seven (7) business days. It is an ideal option especially when you have a business opportunity that you would want to grab in the market. The subsequent invoices can get financed on the same business day.
6] Relieve Stress
You will not need to wait any longer for the clients to make the payments. You will be able to meet your payroll, pay the bills and also remit taxes.
Every business owner experiences the struggle of having a sustainable cash flow. Invoice factoring has enabled business owners solve the problem mostly caused by slow-paying clients.
Call us today for all your business management needs. We are experts in the industry and our greatest desire is to see you succeed
