• Dec 5

    4bd4b9b2-a157-474d-84da-24b875b047f1Raising capital is hard in itself as money is always a difficult resource to come by. This is likewise the reason why entrepreneurs are getting more cautious and keen in their search of the right methods to tap. So in order to help in this situation, we decided to shed more light on one of the more prominent options in the market today: invoice factoring.

    The name itself gives us some hints. This method makes use of an invoice or receivable, one born out of a credit sales transaction, to raise the needed capital. This is done by way of selling the rights to their collection in exchange for an advance of their value. What does this mean? The company gets to receive cash immediately instead of having to wait until maturity while the provider gets a minimal fixed fee in exchange and gets to collect from the said invoice/s once they mature.

    There are many benefits to using invoice factoring and today we are listing down five of its most beloved perks, as follows:

    1. It’s fast. The only one of its kind, invoice factoring can be processed with cash released in as fast as a day’s time. Yes, twenty-four hours! It’s a more hassle-free and not to mention quick approach making it perfect even for emergency expenses and pressing situations.

    2. It hastens collection. Companies no longer have to wait until maturity for them to be able to collect from the invoice/s. The advance hastens the process an eliminates the necessary waiting period allowing for the entity to be more liquid in terms of its assets.

    3. It’s not a debt. The beauty to factoring is that despite being a means of finance, it is not a loan therefore it creates zero liability in the balance sheet. Additionally, it comes without a need for collateral and zero interests but rather a fixed fee agreed on by the parties at the beginning of the transaction.

    4. It improves cash flows. The ability to tie up actual cash collections to sales is one of invoice factoring’s most celebrated characteristics. Not only does it improve cash flows, it also betters liquidity, and strengthens working capital.

    5. It’s non-restrictive. The cash or resources received from an invoice factoring arrangement can be used in whichever way the business deems fit as there is non-restriction when it comes to how they are to be spent as with other methods in finance.