Invoicing is the best tool to grow your business and improve the stability of your business. In case if a business owner needs financial support, then they approach a bank for loan or seeking to borrow from other people. But there is an issue with both methods because you need to pay on time when they face any loss.
But there is an alternative method to solve this, short term helps to level up your business fast.
What is an Invoicing Factoring Service?
Invoice factoring is the best way to save your business. Invoice factoring is a form of finance where you will submit all your unsettled invoices for the factor concerned. The seller gets immediate liquidity according to your due invoices. The factoring company will collect the invoice amount directly from the customers.
For Example:
A Company called ABC sells their invoices to the factoring company for immediate cash of Rs. 2,00,000. The factoring company monitors the invoices and charges fees from 1% to 2% from the seller. So, (2,00,000 x 2 /100) = 4000. This is the fees amount for factoring company. The Sellers will get Rs. 1,96,000 from the factoring company.
Why Are Factoring Services Better than Loans?
These are the essential things to you need to know before using the factoring services to grow up your business, why they are better than taking loans;
- Paper works are easy to complete and gives quick access to cash
- Documentation and verification process are very less when compared to other loans
- They give more importance to the customers credit scores than yours
- If the documents are once verified, you will receive the payment within one or two days
- In factoring companies, you can get unlimited funds, because they provide cash based upon the unpaid invoices, so there is no limit for cash.
Requirements for Invoice Factoring
- Client with good credit score: The Factoring companies only gives more importance to the customers credit score than yours. Once you send the unpaid invoices to the factoring company then the whole responsibility goes under the control of them. That’s why they are expecting good credit scores from the customers.
- Complete details of your business: Before accepting your unpaid invoices factoring companies needs the complete details of the customers such as personal contacts, email, address, balance sheet, income statement etc.
- Unpaid Invoices: Need to provide the unpaid invoices with customer name, date and time in a report format. This is included in the fund approving process.
- Bank Account in the name of your Business: Factoring company transfers the funds only to your business account not to your personal account.
- Personal Documents: With Unpaid Invoices you need to attach your personal documents like driving license, passport, address proof etc.
Ways to Grow up your Business with Invoice Formatting
Immediate Access to Cash
Whenever your business needs financial support for managing or growing up your business, you will borrow fund from the bank or from your friends, but invoice factoring is the best way to get money, it is safe and very easy way when compared to other methods.
No Restriction to use the money for particular purpose
When you request a loan in banks, you need to submit the corrects details and the exact requirements for cash. Example: A machinery loan only needs to be used to buy machinery.
But in factoring companies they have no restrictions on using the money for any purpose. Also, sellers do not need to submit any requirement details for this loan.
The Company Keeps on working forever
When you are trying to run your company without revenue, it quickly gives falls in your business soon. Then the Business owners are not able to pay for their employees and getting money issues in other company expenses. A successful business mostly depends upon the health and wealth of their employees. Factoring companies help the company to get money for their business with instant approval.
No Worries while collecting payments from your customers
Once the unpaid invoices are forwarded to the factoring company, they will take responsibility for the customer’s debt. You didn’t want to worry about your unpaid invoices.
After sending your unpaid invoices, you have no need to worry about your financial problems, you can start focusing on your business growth, and plans, tie up with other concerns, expansion of the branches in other areas, etc. without any delay.
Chances of Fraudulent Customers Are Lower
The factoring company mainly checks your business credit score for eligibility. But invoice factoring is entirely different from bank loans.
Factoring companies is the best solution for business owners who are facing financial problems, and it is proved here. So don’t waste your time in banks for loans. While making invoices, online invoice software for small business owners help to save money and your time.
