Should your business use invoice factoring services?
Leveraging invoice factoring services from a trusted funding partner can help support your growth. Find out if this alternative funding solution is right for your business.
The benefits of invoice factoring, as we’ve discussed, can provide business owners with the freedom to increase cash flow when needed. It can also free up time and resources (instead of worrying about receivables) and avoid disruptions in their business growth plans.
Deciding if invoice factoring is right for you depends on your cash flow budgeting. If you need to create a cash flow budget or need to update an existing one, use these seven easy steps to help you get started:
- Finding the right tools or software to prepare forecasts
- Setting a time frame for your budgets
- Preparing a sales forecast
- Projecting cash inflows
- Projecting cash outflows
- Calculating the ending cash balance
- Setting a minimum cash flow balance
These proactive steps give you a 30,000-foot view of your business’s cash flow situation and how much money you may need for future growth.
Finding the right lending partner
Once you’ve determined your budget and cash flow projections, it’s time to begin finding the right partner for your invoice factoring journey.
It’s important to know:
- The type of service being offered: recourse (when the customer will buy back invoices that are unpaid) or non-recourse (when the factor assumes the risk and guarantees the invoice)
- The terms and rates of service: including cancellation clauses, fees and transparency of the transaction
- Industry experience and knowledge
- Service: speed, availability and flexibility
Beyond knowing the kind of partner you want to (or should) work with, it’s important to know the right questions to ask of your invoice factoring company. It could be anything from simply asking about their experience and contract terms, to the fees for service.
Read what questions to ask with the Liquid Capital Invoice Factoring Guidebook.
Who can benefit from invoice factoring services?
Invoice factoring can solve a variety of common problems that small and medium-sized businesses experience. However, it’s also important to consider why and when you would choose to use invoice factoring services.
For example, invoice factoring is ideal for businesses that work with other businesses where transactions involve invoices.
While some factoring companies will require a buy-back for the unpaid invoice or replace it with one of equal or greater value, Liquid Capital takes a different approach to factoring our clients’ invoices.
Liquid Capital will never surprise you with hidden terms or fees, and there won’t’ be any constricted or complicated provisions. We believe in complete transparency.
Control your cash flow
We want our clients to stay in control of their business and feel confident about the invoice factoring process as a strategic funding tool. We’re committed to making sure you understand how invoice factoring works and how you can use it to grow your company.
While the ups and downs of the current economic environment may make financing a difficult path to navigate, we make it easy with alternative options to traditional debt. When considering the future growth of your business, the benefits of invoice factoring may make a lot of sense when addressing your cash flow challenges.
At the end of the day, you know your business best — including your customer relationships and your future cash flow needs. But we will do our best to help understand your needs, business goals and help you get there.