Running a small business can sometimes be quite challenging due to low cash flow. It can bring some operations to a standstill. Fortunately, there is a viable option that can help businesses maintain consistent cash flow, and that is through invoice factoring.
Invoice factoring is the process of turning your outstanding [unpaid] invoices into cash for immediate use. You basically sell the outstanding invoices to an invoice factoring company that will pay you a lump sum, usually between 70% to 90% of the total invoice.
But when can you determine when it is the best time to do invoice factoring? Well, keep reading this piece as we give you signs that show you should take advantage of invoice factoring.
- Slow seasons and low cash flow
Slow seasons are common in business. During this period, you experience low cash flow because sales are low or you are waiting for your customers to pay you up, which can take months. When that happens, this is the right time for you to factor all the invoices to get immediate cash.
Generally, invoice factoring is designed to help businesses maintain consistent cash flow even if customers haven’t paid their bills.
An invoice factoring company will buy your invoices and give you up to 96% on the invoice. This is a perfect way to get the cash flow you need to keep the business running smoothly, the process is also quite easy and convenient. It will take a matter or a few days and you will have the money, unlike if you apply for a loan that may take a while before being approved.
- You want your business to grow
If you are ready to grow and expand your business, you will definitely need the cash flow to achieve that. Expanding your business requires a lot of money, especially if you want to move to a larger establishment, hire more employees, or purchase new pieces of equipment. When expanding your business, you need to look for financial options to do that. If you have money outside that is yet to be paid, but they are taking long, you may opt for invoice factoring. Through factoring your invoices to invoice factoring firms such as Saskatchewan Factoring, you will not have to worry about getting a loan or paying out of your pocket. You can use the cash from factoring to buy the new equipment, hire additional employees, or move to a larger space. It is up to you to do whatever you want with the money.
- You need short term financing
One of the best things about invoice factoring is that it offers a short-term financing solution. Invoice factoring allows you to access cash quickly so that your business can continue running smoothly. Invoice factoring is the best option if you have short-term financing needs, and you cannot wait weeks or months for your loan to be approved. So if you don’t want to commit to a long-term financial option such as loans, then invoice factoring is your perfect option.