Businesses that Greatly Benefit from Factoring

Businesses that Greatly Benefit from Factoring

Factoring is good for businesses who issue invoices and allow credit to their clients. This is an effective solution for companies to still maintain a good cash flow despite payment delays.

All businesses can use these services to aid them financially. Some though benefit from it more than others. These businesses really need it in order to survive and continue with their operations. They are at high risk of getting into financial troubles if they can’t properly manage their cash flow.

invoice factoring
photo credit: DG EMPL

These are the businesses that will greatly benefit from factoring:

1. Start-ups

Businesses that are just starting up may have a hard time with their operations if clients take 60 or 90 days to pay. This may hinder business operations as start-ups usually don’t have much finances yet to cover up unpaid or pending invoices. Start-ups may also have a hard time applying for loans as their business is just fairly new. With business factoring, start-ups can continue with their operations and pay for payroll and utilities even if they have invoices still awaiting payment from clients.

2. Small businesses

Like start-ups, small businesses may also have a difficult time getting loans. So when they need finances to take care of daily business expenditures because unpaid invoices are piling up, they don’t know where to turn. This is where this service comes in handy. A small business heavily relies on these invoices to be paid to continue with their operations. Invoice discounting can be the solution to this problem.

3. New industries

While restaurants can be considered as an established part of the food industry, online-ordering services may be considered as a new business venture in the food industry. Businesses like these usually have a difficulty in getting business loans approved. Business factoring can also help these new industries in managing their cash flow.

4. Businesses with large inventories

Businesses with large inventories will greatly benefit from business factoring. Examples of these are retail stores, hardware stores and department stores. These businesses need to have a proper cash flow to sustain the demand for their products. If unpaid invoices become a constant problem, this may deter them from getting enough products to supply their customer’s demand. And if this is constantly a problem, their business can no longer compete. If the business takes advantage of factoring services, they can easily meet customer’s demands even with unpaid invoices.

5. Businesses with high receivables

High amount of receivables means high amount of cash that could have been used for business operations. If your business has a high amount of receivables for a long amount of time this means there is also a high amount of cash that needs to be immediately covered up. Businesses in this predicament may find themselves having a difficult time managing their finances. Business factoring can help them out of this hole.

6. Businesses with slow paying clients

Businesses that have clients who pay on time are truly fortunate. But this is something that happens rarely. If your business is one of those that have clients who wait until the last moment to pay or even pay over the allowed timeframe, then your business may be in trouble. To avoid disrupting your cash flow, getting factoring service is the ultimate solution.

Businesses need to get the money rolling in order to continue with their operations, to continue supplying products to their customers and to continue competing in the market. With pending invoices and high amount of receivables, companies risk getting their cash flow disrupted and risk getting out of business. Factoring can help businesses, especially the ones on the list, out of this conundrum and ensure smooth cash flow for their company’s continued success.

Debra Wright

A self-professed geek, Debra Wright has dreamt of being a writer since as long as she could remember. She has recently written about a number of topics online, including business management, and hopes to get more people interested in decision making through her written work. Get to know her more through twitter @debrawrites.