If you’re a small business owner you probably have reached that financial spot where you have plenty of sales, but not the money in hand for them yet. Your business is booming, but you still don’t know how you are going to stay in business for another day. You just made one bad choice and now, despite your work and your thriving business, you are broke. This is when you might want to consider invoice factoring your small business.
Factoring Your Small Business’s Assets
If you are looking for quick cash on a deal you haven’t been paid for yet, small business factoring might be a choice you want to consider. This is where you go to a lender and offer them the proceeds from a future payment of a loyal customer. The lender will take the invoice you offer from the customer and decide if that customer’s credit is a safe debt. If the business factor approves your client, they lend a large portion of the money the client owes you in exchange for the debt. If you would like to better understand invoices, here is a Wikipedia link about invoices.
What You Can Do With the Money
Once you sell the debt, the money is yours. You can do anything from buying office supplies to putting braces on your child’s teeth. The company that bought the debt from you is not in charge of the money they gave you–you are. There is no fear of a bank coming and taking away your house with this type of loan, they are purchasing a debt from you rather than loaning you money.
What Happens to the Client
The client pays their bill just like they would have to you. They don’t have to pay any more than they would have to you, and everything will be normal in their opinion. The only difference with this method of payment compared to your normal method of business is that you get your money quicker. The buyer of the debt will also have to keep part of the payment without repaying you—this money is compensation for their time and the assets they have out on the line for your business. If you would like to find out more about factoring debt for your business’s growth, here is the link to a Wikipedia article about the subject.
If They Don’t Pay
But what happens if your client doesn’t pay you? What if you just happen to sell a client’s debt and then the client never wants to pay their bill? This will not be your problem; there will be no debt collectors showing up on your doorstep or threatening letters in the mail, as soon as the client’s bill is sold, you are no longer in danger. Your part in any mess that might arise between the agency and your client is nonexistent. It’s between them and the debt buyer. You are free.
So, if you find yourself neck deep in people who owe you money and no way to pay your own bills as you wait for payments, invoice factoring might be the right choice for you. This is a safe method that moves you out of the position of middle man and into the driver’s seat. Factoring debts is a guaranteed way to get your money when you need it.