If your business deals with accounts receivables, you’ve likely run into an issue where you had outstanding payments coming in that were behind schedule. Having money tied up in receivables can be tough when you need to invest that money back into the business or fund a new project that’s come in.

Many businesses rely on a healthy cash flow in order to purchase equipment and execute their day-to-day operations. One way that businesses have overcome the issue of late payments through receivables is through an avenue called factoring.

What is Factoring?

Receivables factoring is a process that involves sending out your invoices to a third-party service that pays you a portion of the amount in a shorter turnaround than it would’ve normally been paid. There are pros and cons to this avenue, but many times the quick inflow of cash makes it well worth the costs.

1. No Collateral Required

One major pro of factoring is that you don’t have to provide any collateral upfront in order to get a payment from getting a loan on the invoice.  All you need, as a business, is the original invoice for the factoring firm to approve the loan.

2. Great For Business Growth

When you operate a small business, growth can be one of the biggest strains on your company. When you have outstanding invoices that haven’t been paid, you may have to juggle your resources to take care of payroll and inventory, among other things. Or, you may have to pass on a life-changing project because you don’t have the resources available to adequately execute it.

Having access to a factoring service gives you flexibility in taking on new projects, hiring more employees and investing in new equipment while you wait for invoices to be paid. Growth initiatives don’t have to take a back seat to your billing department’s collection efforts when factoring is involved.

3. No More Waiting

When you’re trying to run a competitive business, time is of the essence. Rather than waiting 45, 60, or 90 days or more for invoices to get paid, you can speed things up. Since it can take some time to find the right factoring company for your business and for you to understand the requirements and terms that factoring company offers, now is the best time to start vetting your options.

Do your research and find a factoring service that complements your business and can be an asset to your growth.