In today’s economy, a growing number of businesses are taking advantage of factoring, a tried-and-true alternative to traditional lending. With this kind of financing, you receive payment upfront on your invoices without having to wait weeks or even months to get paid and without incurring debt. To help you better understand the benefits of factoring, here’s a look at certain misconceptions:
Myth #1: Established companies shouldn’t need or use factoring services – In the past, some people thought that only smaller, start-up businesses needed factoring services. Indeed, factoring has helped many new companies grow and expand, but many mid-sized companies that have been in business for decades also want to partner with factoring companies. It allows you to outsource your debt collecting department and access your cash fast, often within a few hours.
Myth #2: Factoring services are all the same – Not all factoring companies offer the same services, so you should never assume that customer service, document storage, online access, rates, and included programs will be the same across the board. When you’re comparing companies, request written factoring agreements so that you can compare everything.
Myth #3: Factoring is like a loan from a bank – When compared to traditional bank loan rates, factoring can be relatively inexpensive. Unlike applying for a bank loan, you won’t need collateral and you won’t be evaluated on your credit history. Most factoring companies will evaluate your application based on the credit worthiness of your clients, not on your collateral or credit report. In addition, with factoring, you won’t be accumulating debt.
Myth #4: You have to factor all of your invoices – As the owner of a small to medium-sized business, you may have built up relationships with your clients over the years. You know that some of them are quick payers while others have longer payment turnaround times or need continual prodding before paying. While it makes sense to factor some of your invoices, you may not want to change the way you’re doing business with all of your clients.
For more information about factoring choices, get an instant factoring rate quote today.