Cash flow is important for all sort of business- be it big or small. Sometimes there arise various situations which demand instant cash. This is difficult and one can take help of invoice factoring to solve the problem. The process involves submission of invoices that has payment dues to the factoring agencies. The agencies scrutinize the invoices and then pays eighty percent of the total due amount. The left twenty percent is paid after successfully taking payments from the clients. The agencies keep two percent as invoice fees, which is affordable by all.
There are several advantages of invoice factoring. This is a way to access instant cash for invoices. The authenticity of invoices is checked prior payment of the invoice amount. Let’s take a look at the importance of invoice factoring for business:
- Cash without debt:
The payment of invoices by factoring agencies is basically the amount of money that was left unpaid for several days. Therefore once the payment is done the owners of small or huge business need not worry about the debt. There is no risk of payments later. The factoring fees of the company are also deducted from the left amount. The fees are just two percent of the total due amount.
- Access to easy cash:
Once the legal invoice is submitted to the factoring agencies they check it and pay the amount within a maximum of 10 days. The access to such instant cash is difficult. Applying for a loan from a bank and then getting approval to it is difficult. The process is time-consuming. An alternative to this is invoice factoring, which allows an access to huge amount of cash without debt, that too instantly. There are various situations that pop up in business and requirement of cash is very important. Invoice factoring is the only way out.
- Easy to qualify for invoice factoring:
Applying for bank loans requires time and qualifying for it is difficult as well. On the contrary, the invoice factoring qualifications are flexible. Maintaining of a perfect invoice is the only way to qualify for factoring. The invoice must not contain mistakes. The submission of an invoice is followed by the scrutiny of it. Apart checking the money is paid to the customer within 3-4 days of approval.
The above-stated points account to the popularity of the factoring. This can be the perfect way to crunch the cash flow and also derive cash for invoices. The small business holders can be benefitted by the process since there remains no risk of debt to be paid later. There is no hidden cost of the factoring. Therefore this is a feasible option for instant cash in small business.