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Invoice Factoring – Company Size Does Not Matter

Posted by Aaron Zahedani on Wed, Sep 18, 2013 @ 07:54 AM

Invoice FactoringDo Fortune 500 companies really factor their invoices? Believe it or not, factoring is an excellent tool used by all sizes of companies to increase cash flow without increasing debt burden.

Factoring accounts receivable is often considered a great option used by small businesses that need quick cash flow in order to survive. You may be surprised at the number of Fortune 500 companies that also choose to factor their invoices, or even use invoice factoring companies as their complete outsource accounts receivable department, to generate faster cash flow for their business. 

What are some of the main reasons small to medium sized businesses decide to factor?

  • To pay for their day to day cash flow requirements

  • To solve a specific business problem, such as funding payroll – a great option for staffing companies in particular 

  • To raise the required capital for expansion

  • As an alternative to a bank loan which may be hard to secure

So why should a large corporation even consider factoring? They generally have the cash to expand, can secure a bank loan without a problem, and have a firm foothold in their market.

Fortune 500 companies generally do not have the same reasons for factoring their invoices, but the benefits are the same. Factoring invoices is basically providing working capital, and that is a benefit no matter your size. Remember, large companies have slow paying customers also! There are many benefits for both small and large businesses alike:

  • Factoring generates fast cash flow with little commitment

  • Cash flow is increased immediately with no increase in debt

  • Available cash can be increased quickly, providing quick funding for large opportunities

  • Credit collection expenses are reduced

  • Efficiencies in billing and collection of invoices are increased

Factoring companies maintain a close relationship with all of their clients, whatever the size, and can provide exemplary financial reporting to their clients, allowing management to focus on production, marketing, purchasing and many other functions. Factoring companies have extensive knowledge of their client’s industries and understand their financing needs.

Consider factoring as your tool for generating income, immediately increasing cash flow without waiting for approval on a loan from the bank, or increasing your debt burden. For any size business, if the funds generated from factoring your accounts receivable are used carefully, the rate paid to your factor can actually be covered by the potential generation of increased income. For example if you were to use the factored funds to expand your business, this in turn would lead to an increase in your number of customers and therefore a potential increase in profits.

So, no matter how large or small your company may be, factoring can certainly be an excellent answer to increasing your cash flow to help with the basic needs of a small company, right through to the more complex requirements of a Fortune 500 company. Invoice factoring offers so much more than simple cash flow management.

Discover some of the truths and tips of invoice factoring to fully understand the benefits:

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Topics: Alternative Financing, Cash Flow, Business Growth, About Invoice Factoring, Financing Government Contractors

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