How Small Businesses Can Benefit From Factoring

How Small Businesses Can Benefit From Factoring

Many small businesses need extra financing to help them get things done. Some businesses can’t exist without boosting their cash flow at one time or another. For small business owners, it might be challenging to figure out what to do when they find themselves short of cash for the first time. Fortunately, there is a way that business owners can get help without taking out a loan. Factoring can help get businesses cash without needing to apply for loans.

How it Works

When companies have invoices in their accounts receivable, they can usually use these unpaid receivables to get some cash with the help of factoring. A factor is a company that gives cash to a business in exchange for these invoices. The factor gives the amount of the invoice minus a discount to the business owner. The discount helps the factoring company make money to operate. When the bill comes due to be paid, the factor is the one to collect on the account. Usually, the business owner doesn’t have to undergo a credit check to receive services. The factor will check the credit history of the company owing money on the invoice to see how likely they are to pay their account on time.

Who Provides Services

Most of the time, business owners can go into an in-person location to start the factoring process. More commonly, these companies are becoming fully available online. With the help of modern technology, this service can be provided fully remotely. This helps applicants complete applications quicker, and also helps them get approved faster. The process starts by approving the invoices. The business owner then receives the amount of the invoice at a discount. Once the applicant receives funds, the factor will then need to arrange payment with the company on the invoice.

Who it Helps

Factoring is a particularly helpful tool for businesses that qualify for it. When a business deals with other companies and services, then they usually have invoices that can be used to receive cash. Some industries have historically benefited from factoring, while other businesses can’t qualify for it at all. If a company doesn’t deal with accounts receivable, then they’d need to choose a different option besides factoring.

Factoring can help many businesses that regularly deal with accounts receivable. If your business needs cash and is waiting on invoices, contact Charis Commercial Capital and ask us about our factoring services.


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