If your business is in need of immediate cash you might not know where to turn to. Loans can be risky and raising prices can turn away clients. Invoice factoring is an option you can turn to. Invoice factoring companies will buy your unpaid company invoices and hold them for a time until they receive the full payment from the client. Here are some things you should know about this process.
If you need $20,000, as an example, for an emergency piece of equipment, invoice factoring is a good choice. The company will buy your invoices and provide you with a share of the price, which you can use immediately for purchasing. On the back end, you will have to give them a set upon percentage as a factoring fee. This is where these companies make money.
This is a great option for your company if you typically have better cash flow. If you cannot commit to paying back this additional percentage in the future, you could end up being sued for a lot more for backing out of a contract. They will look at your customer’s accountability before taking you on as a client.