Being an entrepreneur, you are aware that cash is the lifeline for your business. If fact, as your organization’s activities expand in the marketplace, you need more money to finance such operations. You usually visit your local bank with the hope of getting the necessary funds. However, this financial institution may have very stringent criteria when it comes to giving loans to proprietors. Business experts say you can use your establishment’s accounts receivables to get the money you need in the form of invoice financing.
Anju Vallabhaneni – Advantages of Invoice Factoring
Anju Vallabhaneni is the former Chief Executive Officer at United Software Group, Inc. He says invoice factoring involves selling your establishment’s outstanding invoices to a factoring company. The amount of cash you can get depends upon the volume of outstanding accounts receivable your organization has at any point of time. He goes on the explain that this form of financing has the following advantages:
- Enhance your organization’s cash flow
One of the most important benefits of invoice factoring is that it goes a long way in enhancing your organization’s cash flow position. With this mode of finance, you can get the money you need to meet the costs of your establishment’s expansion in the marketplace.
- Simple and prompt funding
Companies carrying out invoice factoring activities just need a couple of weeksto scrutinize your organization’s outstanding accounts receivables. This implies that you do not have to wait for a very long time to get the money you need to operate your business. Other hand, most commercial banks may take a considerable amount of time evaluating the creditworthiness of your organization before they sanction your loan.
- Expands as your business grows
The amount of money you can obtain from invoice factoring is directly proportional to the quantum of invoices you issue to your customers. This means that as your business grows and expands its operations in the marketplace, the more money you get from this mode of finance.
- Cheap option than equity
When people managing large corporate enterprises need money to finance their expansion efforts of their organization, they offer equity shares to the public. However, these new investors expect a high rate of return on the money they invest in these organizations. On other hand, invoice factoring can offer them the same amount of money they need to finance their activities by selling their establishment’s accounts receivable.
- More time focus on the core areas of your business
When you sell your outstanding invoices to a factoring company, the officials of this organization scrutinize these documents and creditworthiness of your customers. If they have no issues in this respect, they get you the money you need after deducting their fees and expenses. It is then their responsibility to collect the money your customers owe you. This gives you more time to focus on core areas of your business.
Anju Vallabhaneni says you need to remember that the money invoice factoring companies give you is not a loan. You are selling your outstanding invoices to these corporate enterprises. This goes a long way in help you to improve your organization’s cash flow position.