One of the most common mistakes made by business owners is to assume that factoring working capital is only required when a company is struggling to meet financial commitments or when there is a temporary gap in cash flow due to timing between invoicing and payment.
While factoring working capital can be used in these instances to provide the funding relief needed, it can also be a very effective tool to use when growing a business as well. Savvy business owners will utilize factoring services not to get just the basic funding, but to be able to take advantage of opportunities without the need for a bank loan or a line of credit.
Reduce Office Costs
By working with a factoring company, all of the invoices you sell to the factor are then managed by their office. This provides a team that specializes in account management to take over your back-office responsibility with regards to those accounts.
This cuts down on your need to maintain a large accounts receivable department and allows your staff to focus on building and growing your business.
Take Advantage of Early Payment Discounts
Most of your suppliers will offer an early payment discount for services or products they provide to your business. By using factoring working capital, you can take advantage of these discounts, which can be substantial in some industries. Saving several percent on large, ongoing orders can add to your ability to increase inventory and equipment on hand.
Take on New Business
With adequate inventory, equipment and employees, a business never has to pass on the opportunity to take on new business. Not only does this help your business over the short term but it can provide a growing customer base.
With more diverse customers there is greater potential to be able to have invoices continually staggered. This, in turn, helps with maintaining a more balanced cash flow through the business over time.