Bay View Funding Blog

Invoice factoring provides businesses with quick cash they can use to invest in expansion or cover expenses. However, business owners often wonder if it’s the most cost-effective way to obtain funding. Here’s a breakdown of the process, a comparison of recourse and non-recourse factoring, and a look at factoring fees.

All types of financing involve risk. In the field of invoice factoring, the risk is usually derived from insolvent customers. In invoice factoring contracts, either the factor or the client company assumes the risk of nonpayment. Understanding financial risk can help you choose the right type of factoring arrangement for your company’s needs.

Startups can be some of the most innovative business ventures. Being innovative can also involve a lot of risk, and many startups suffer from time constraints, staffing to meet demands, and difficulty obtaining funding. Invoice factoring may be able to help with funding by optimizing cash flow without the long delay that generally follows the invoicing process. Using invoice factoring may help ensure that your startup won’t run out of funds, which could potentially halt operations and slow growth.

Business is full of unexpected surprises, some of them expensive. Invoice factoring can help you turn unpaid receivables into workable capital for your company. If you have unpaid invoices, it is unwise to let them sit for too long. The faster you can collect (or receive payment from) them, the less damaging the burden from surprise expenditures can be.

If you’re a business owner, there are two easy ways to turn your unpaid customer invoices into cash – invoice factoring and invoice financing. While these two terms are closely related, there are some important differences that may confuse you if you’re not familiar with them.

What Is Invoice Factoring?

The economy is showing signs of improvement. Your business is growing. Happy customers send more customers to your door. Business can boom with more infrastructure. You want to stay competitive and flexible in the marketplace. Those happy customers will pay you. But that may take 30, 60, or up to 90 days. Yes, the money will come in…but you could sure use it NOW. Your employees deserve to be paid on time…and so do you!

Cash flow can sometimes be a challenge for any business. This is especially true when your customers pay for goods and services 30 – 60 days after receiving them. Invoice factoring offers your business the opportunity to turn outstanding invoices into cash. 

Factoring your accounts receivable is a valuable financial tool for companies that have experienced difficulty obtaining traditional funding and have reliable but slow paying accounts. It helps if the invoices are for substantial amounts, rather than many invoices for smaller amounts. There are always exceptions to the rule, but this should help establish whether invoice factoring may be the right choice for your company.