Beyond passion and perseverance, every business needs to produce money to push through with its vision and keep up with the competitive landscape. So while improving your customer relationship lays the foundation of your company’s continuous success, it’s just as important to ensure you maintain a healthy cash flow. 

What is Invoice Factoring, and Why is it Important?

Invoice factoring is the process of selling invoices to third-party financiers. It is a relatively simple concept of obtaining cash from a lender against the value of invoices. In essence, factoring is a short-term loan advanced to a business by a finance provider in exchange for an invoice. 

Doing this helps the business avoid waiting for the customer to pay their invoice, subsequently saving them time and money. By using invoice factoring, the business is able to focus on its core competencies and not have to worry about waiting 30 plus days to get paid on outstanding invoices. 

Why Do Companies Use Invoice Factoring?

Cash flow is the lifeblood of your business. If you struggle or don’t have cash flow, you will potentially have to make very difficult cuts to your expenses in order to make payroll. 

These cuts could include belt-tightening, which could lead to problems with employee retention. It may also force you to make difficult cuts in your marketing and branding. If you are new to invoice factoring, this can have a ripple effect that can be costly in the future.

The best way to ensure better cash flow is to obtain access to it quicker. With that in mind, the benefits of invoice factoring include:

  • Payment is made within a short period of time
  • Invoice factoring is a flexible system that allows companies to add and buy back invoices as needed 
  • Invoice factoring can help your company pay bills on time, which increases corporate credibility with your suppliers and vendors;
  • Invoice factoring helps businesses focus on delivering value to their customers and not be distracted by cash flow difficulties

How Does Invoice Factoring Impact Your Customer Relationships?

Customers are focused on getting high-quality products and services from your company. Most customers want to pay their invoices on time and have little concern about the address where payments are sent, as this is often an accounting department transaction. Factoring companies will notify your customers of the correct address and treat your customers as you would, with respect and kindness. 

The Bottom Line: How Invoice Factoring can Keep Your Business Financially Independent

Invoice factoring is an extremely useful tool for startups that are just getting off the ground and for large corporations that need access to capital and don’t want to add debt to the balance sheet. Factoring allows companies in a variety of industries to improve cash flow and maintain good customer relations. 

Are You Looking for a Factoring Company in Birmingham, Alabama, to Fund Your Business? 

Building your business from the ground up is an arduous yet rewarding process, but finding the funds to propel your growth is easier said than done. Portal Capital can help stabilize your foundation with our capital solutions tailored to help small businesses like yours flourish. 

Invoice factoring and asset-based lending are easier with us, so get in touch with us today to get a free quote and see how we can provide instant funding for your business!