Alternative lending options are one of the best tools for cash flow management your business can adopt because they don’t just provide you with credit options outside of the restrictions of traditional loans and credit lines. They also offer you solutions to issues you never knew you could resolve with the right financing, like offloading unpaid invoices without taking a complete loss or raising working capital ahead of a major opportunity. When you’re sitting on unpaid invoices and you need money, factoring is one option that has a few unique benefits you won’t find in other financial products.

Close Out Old Invoices

You can finance purchase orders with a cash advance, but that keeps them on your books even if it establishes your financing company as the recipient for payments. When you want to be done with an old account or order, you need a way to preserve as much of their value as possible while discharging the debt so you can move forward. The solution is to sell the invoice to an investor for a percentage of its face value. They then take over collections, and you can simply move on because your customer is the party responsible for paying the factor. Of course, this can strain relationships with ongoing clients, so unless you are closing an account entirely, you may want to have a conversation with the client before factoring their invoices.

Raise Working Capital Without Debt

Another great reason to go to the factor is to raise the capital you won’t have to repay through debt. If you’re looking for ways to meet the down payment requirements for an asset purchase, this can provide some or all of the funds. It can also provide you with working capital for cash flow if you have a lot of unpaid invoices and you need to make sure your monthly expenses don’t deplete your cash reserves.

Save Money By Outsourcing Receivables

Collecting on invoices can be a major labor expense as your business grows, but when you have a method for moving forward without investing extra labor chasing old invoices, you save money on those costs. In the end, taking a percentage of their face value can even be a net gain over paying for an extensive collections department. Factoring reduces your receivables to the staff needed to track them, and when customers know you use a factor as a matter of course, they’re less likely to draw conclusions about your business relationship from it, making it even easier to use as a matter of course.