Should I Use a Factoring Service?
If you read our last post, What is Factoring?, then you’re well aware of what invoice factoring is all about. Naturally, the next question you may be asking yourself is…should I use a factoring service? The answer to this question isn’t quite so simple. Your decision of whether or not to use accounts receivable factoring should include consideration of the unique facts and circumstances surrounding your business. As a result, there is simply no one size fits all answer. So if you’d like to know if YOUR BUSINESS should use a factoring service, our best recommendation is to Contact Us so that we can have an honest conversation with your specific circumstances in mind. If you’re not quite ready to have that conversation, no problem, we’ve compiled a small list of situations indicating that you may want to consider using a top factoring service:
Start-Ups
If you’re a start-up, obtaining the capital you need can be difficult with no operating history. As a result, any start-up having difficulty obtaining capital should seriously consider invoice factoring as a viable solution. There is no reason to “give up equity” if traditional bank financing is unavailable, instead use a quality factoring service to get the working capital you need. If this is your situation, read our Invoice Factoring for Start-Ups post to learn more.
Rapid Growth
Businesses experiencing rapid growth often need working capital fast. For these companies, traditional bank financing is often unavailable in the amount and timeframe needed. For example, in her article, “How Long Does It Take to Get an SBA Loan?”, Louise Balle states:
Expect the process to take a minimum of 60 to 90 days.
Fortunately, the application and approval process for establishing a factoring service account is much quicker and far less intrusive than what banks require. Additionally, it’s not uncommon to get approved for a factoring facility in an amount much greater than what banks offer.
Poor Credit
There are two credit-related reasons a bank will typically decline a loan. The first is having little to no credit history while the second is having poor credit. Poor credit can result from a history of delinquent payments, past bankruptcies, and existing tax liens to name just a few. The advantage of accounts receivable financing is that you can typically qualify for funding despite poor credit since it’s really the credit of your customers that matters the most.
Factoring Service Conclusions
As we mentioned earlier in this post, this is just a small list of those who should consider using invoice discounting. The truth is that one blog post can’t even come close to accommodating all the situations in which factoring should be considered. That’s why we highly recommend contacting a factoring specialist to discuss your specific needs. Please feel free to email us at sales@orionbusinesscapital.com at anytime, we’re always glad to help.