How A Factoring Company Can Benefit A Small Business

When a small business is in need of ready cash to pay salaries and invoices or to expand its operations, one option available is selling accounts receivable to a factoring company. A factoring service purchases a business’s invoices at a discount, and the business gets immediate funds. Unlike a loan, a factoring arrangement is a one-time sale, meaning that the factoring company assumes full responsibility for collecting payment on the invoices. Factoring accounts receivable can be a very effective way for a small business to increase its cash flow.

No Risk Of Lost Income

One of the main benefits of factoring invoices is eliminating the risk of lost income. Most businesses find that a certain percentage of invoices are never paid, while others are not paid without a great deal of effort from the business and its staff. Rather that spend the time on collecting invoices or hiring a professional collection service, many business owners find it cost effective to sell the invoices and be guaranteed of a certain amount of revenue.


Applying for a small business loan is a time-consuming process, and many applications are turned down. Establishing a relationship with a factoring company is much simpler. There is no lengthy application process and no tax returns or financial statements to submit. Businesses just need to provide a list of clients and a history of their accounts. Factoring companies don’t check a business’s credit score or demand collateral, as a lender normally does.


Once the invoices have been approved, the factoring company pays the majority of the sale price for each invoice up front, usually within a day or two, and then the remainder is paid once the invoice has been collected. Fast cash is a benefit especially for small businesses that are just getting started and need the money clients owe sooner than thirty days. Getting fast cash can help a business cover a shortfall and keep their employees paid.

Factoring accounts can be the perfect solution for a small business’s cash flow needs. The key is to find a factoring company that is the right match in terms of size and interests. To learn about choosing an invoice factoring company, read more here.