Are you a small business owner that has outstanding invoices for as long as 30,60,90 days and no cash to pay expenses? The probability of having outstanding invoices when running a manufacturing business vs. a restaurant that gets paid right away is high. If you have accounts receivables that are not being paid by customers on time, you can simply sell the invoices for fast funding.
This type of loan is called invoice funding or factoring. It is asset-based lending and used for all outstanding invoices that are going to be paid over the next 1 to 3 months. There are multiple advantages of getting your accounts receivables funded sooner vs. later. Most of them are mentioned in this article.
Advantages of invoice financing or factoring:
- Quick and easy access to cash.
- You can plan your cash flow accurately for future opportunities.
- Grow your business with an unlimited line of credit.
You can either choose a bank to finance your invoices, or you can find a marketplace lender like BitX Funding. They will find a lender that will advance your outstanding invoices 75% to 90% upfront and if you have government contracts or large construction jobs, no problem.
Basic understanding of Invoice Financing
Basically, lenders that provide funds against your outstanding invoices will charge a small amount of the advance as a fee or interest. For example, if you have $10,000 worth of outstanding invoices the lender will charge 3% of the invoice value and give you the remaining 97% in cash. They give you 75% to 90% upfront and the remaining will be released after your customers pays the invoice.
Factoring will help a certain type of business that are mentioned below:
- Businesses that rely on payment via check
- Businesses with lots of invoices pending
- Businesses with bad credit history and cannot apply for a loan.
- If you want to open a new business and have certain outstanding invoices due from your last business, you can use them to help your startup.
Lenders will check if you’re worthy
There are a couple of things that a lender also checks before they approve the advance. The items listed below will help the lender decide if you are suitable for invoice financing or not. The things lenders check is:
- Your credit history
- The credit history of your customers
- What kind of invoices your business uses?
- What is your strategy for the credit control, or how you make sure invoices get paid?
- Your business plans
- Your industry
This article is what you want to know about the basics of invoice funding for outstanding Invoices of your businesses. If you want to learn more about Factoring and how it can help your business reach out to BitX Funding and one of their account representative.
BitX Funding is the online marketplace for small business owners looking to fund a project. We specialize in connecting small business owners with lenders who will compete for your business. We believe small business owners drive the economy and we are passionate about helping your company reach its full potential.
You can reach loans specialist by toll-free at 1-800-824-2407, or email at firstname.lastname@example.org or applying online here and we can guide you on which loans are the best fit for your business.