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Why Should a Small Business Consider Factoring?

By on August 21, 2018

If you are a small business, you may have heard of business factoring services and wondered whether capital credit factoring or commercial factoring companies could do anything to help you grow your business and ensure a positive cash flow. Here why businesses use business factoring services and what they can do.

Provide Flexibility

One of the competitive challenges for small or even medium-sized businesses is a lack of flexibility compared to larger companies. Those larger companies are typically better positioned due to their size and larger cash flow.

A large business can, for example, afford to take better-paying accounts that pay later, unlike a smaller business which may not be able to afford any account which doesn’t pay immediately. Larger businesses are also less at the mercy of accidents and unexpected changes. Smaller businesses can be thrown completely off their feet by a breakdown, an injury, or a computer hack. Business factoring services provide a way for smaller companies to enjoy this type of flexibility as they strive to compete and grow.

Require Less

Because a bank is loaning money to a company directly, that particular company’s credit rating is of the utmost concern to the bank. Poor credit or simply a lack of credit history can result in highly unfavorable terms for loans. With business factoring services, this is much less of an issue because the factoring financing company is looking at the credit history of clients and customers, not of the business itself.

Allow For Growth

When a smaller business is interested in starting up a new business area or expanding geographically, one way to get there without taking out a hefty bank loan is by using business factoring services. Immediate cash can be invested as if it were a loan, while at the same time the company’s business credit rating improves. This also allows a company to take advantage of discounts, sudden upticks in customer demand, or other time-sensitive opportunities.

Cushion the Blow

A larger business can bear some operating losses for a short period, but that same kind of loss can destroy a smaller business. A small business may suddenly need money to pay off a large tax bill, to meet payroll, to cover temporary operating losses, or to take care of an unexpected repair. Having access to factoring services makes it possible to do this without going into enormous debt or taking out a bank loan.

Poise for Growth

The company may be ready to grow and interested in growth but simply not well-positioned to take the next step. For example, it may be necessary to hire a few more full-time employees. They may require significant investment in materials or inventory in order to increase production. It may be necessary to purchase more trucks or other equipment in order to upscale. Or a company may need to be ready to take advantage of a seasonal demand but not have the dependable, regular cash flow to prepare. That’s when access to business factoring services can make all the difference.

Why Not Just Get a Loan?

If you have a small or medium-size business and are looking to grow, cover costs, become more flexible, or prepare to take advantage of opportunities, why not just get a bank loan? One of the biggest reasons to take advantage of factoring services is simply speed. It takes far less time to get approval and far less time to get cash in hand when taking advantage of business factoring services.

There are a lot of good reasons to consider business factoring services to get your business up and running, to spur new growth, to take advantage of new opportunities, and to provide the flexibility and protection you need in order to compete effectively. Why not look into small business factoring services today and find out how they could help grow your business and improve your bottom line?

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