To Factor, or Not To Factor…(Answers Inside!)

Invoice Factoring – The DOs and DON’Ts

Accounts receivable factoring can be a great way to realize billed funds and create capital, but just like other financial options, there are times when a factoring company may not be the best choice.

• DO Consider a Factoring Company If…You need operating capital tied up in funds owed by your customers.
• DO Consider a Factoring Company If… You need funds quickly. Many invoice factoring transactions can happen in less than 48 hours.
• DO Consider a Factoring Company If… Your business is growing, but you can’t keep up with production because of limited credit, cash, or both.

Accounts receivable factoring let’s a business owners factor existing invoices through a factoring company in exchange for “up-front” money. It’s a very simple premise that is effective, and works quickly. Factoring is ideal for small to medium sized businesses that need creative funding solutions during growth.

Accounts receivable factoring can be a great move, but there are also situations where factoring is a poor financial decision.

• DON’T Consider a Factoring Company If… Your business is struggling to the point of disrepair.

Factoring companies can create capital for growing businesses, but factoring simply accesses billed dollars. It does not and cannot create profit for an unprofitable company.

• DON’T Consider a Factoring Company If… You’re looking for a solution to slow-pay or no-pay customers.

AR factoring is a legitimate funding option that should be used for legitimate business reasons. If your customers are struggling or refusing to pay you, you have options to ensure you receive your payments, but pawning them off to a factoring company isn’t one of then.