How Factoring Can Help a Small Business [Infographic]
Marin Perez
December 18, 2018
One of the biggest challenges for small businesses can be cash flow. That's why you may want to check out small business factoring. This infographic walks you through what it is, as well as how factoring can help small business.
Factoring aims to solve an all-too-common problem: a small business completes a job for a client and invoices them accordingly. The payment typically takes 60 days or longer.
Meanwhile, that small business may face a cash-flow problem until those invoices are paid. Sometimes, this can lead to turning down other clients because you don't have enough capital to invest in the supplies or employees needed for the next job.
Small business factoring enables you to sell those not-yet-paid invoices. This will also involve a fee, so do the math to see if it's worth it for your business.
You'll also want to double-check on the terms and additional fees. For example, some companies offer recourse factoring. This means if the customer doesn't pay the invoice, you may have to replace it with another receivable or pay it yourself. Still, small business factoring can be a great way to get a quick infusion of cash to help grow your business.
Remember, there are a variety of ways to provide finance for your small business. Explore all your options carefully and perhaps consult your accountant or tax pro before making any decisions.
