Invoice factoring is increasing in popularity as an alternative lending source, why?
Basically, factoring your accounts receivable, or obtaining B2B loans against your outstanding invoices is a much safer source of lending than it ever has been before. It is no longer perceived as a predatory lending source, or a last resort for companies who have nowhere else to turn.
We have seen improvements in employment, and consumer spending; and we have also noticed the use of factoring as an effective way of receiving a cash advance on money due to be paid 30 – 90 days later. While the economy continues to slowly get better, in many cases, banks are still sticking to rigid requirements for lending. Factoring companies tend to have more leniency, allowing financing for new equipment, and cash flow for operational growth.
An article, written by Cheryl Conner, in Forbes from last year references that invoice factoring as an alternative, effective lending source has gained traction as an effective way to increase your company’s revenue. The article reports that analysts have seen an increase in both the cash advance and the invoice factoring sectors. Business has grown ‘at double digit levels each year.’ At the time the report was written, the Green Sheet estimated the market for merchant cash advances to be $500-$700 million, with the potential to reach $3-5 billion within the next several years, with Morgan Stanley estimating that the invoice factoring market produces $13-15 billion per year.
The article gives examples of companies offering merchant cash advances and invoice factoring services, and goes into specific detail about the benefits each service has to offer. It is important to do your research when it comes to picking the right company to use. Ask the questions to make sure they are well funded and knowledgeable. Similarly, if your company is already using an invoice factoring service, take time to run a regular audit to make sure you are receiving the best possible service, and if you are not; consider making a change. Thoroughly understand the terms of the contract, and all the costs involved. A good factor will take the time to explain every detail.
We cannot stress strongly enough how important it is that your factor understands your specific industry. Different industries have very specific requirements, and Bay View Funding has deep knowledge and achieved considerable success supplying funding in many vertical markets for over three decades.