Invoice Factoring: Here's What You Should Know About It

Business owners should be aware of invoice factoring, a process that allows involves the conversion of unpaid customer invoices into instant cash. If you've heard of invoice factoring yet, then now is the time to understand its benefits!

Everything You Need to Know

First, invoice factoring is an ideal solution for owners with customers who don't pay their products or services upfront. It allows business owners to gain cash immediately. 

But also, remember that it's not a loan. With invoice factoring, you'll sell your invoices at a discounted price to a company for a hefty amount of money in return.

Invoice factoring is a suitable method for obtaining cash as early as possible to pay your employees. For instance, you manage a catering business that lends its services to another venture, gaining approximately $13,500. Even if your client wants to pay off the invoice a month later, you'll still have enough money to pay your employees a week later. 

Now you might be thinking: why not go to the bank instead? Sure, you could consider getting a loan from a traditional bank, but that requires more paperwork, credit, and physical assets. Also, it could take months before the loan finally closes. So if you're not willing to wait, then you can look towards an invoice factoring or financing company in Singapore that will advance around 85% of your invoice in a week.

The Pros and Cons

Now that we've settled with the basic definition of invoice factoring, let's move on to the pros and cons.

PROS:

• Instant cash - Your capital is the financial foundation that bridges the gap from your business to slow-paying customers. Receive instant cash to obtain working capital as soon as possible.
• Improved cash flow - Loyal customers are a significant factor for expanding your business. You can keep them on longer payment terms with invoice factoring that can also improve cash flow.
• Unsecured financing - As previously mentioned, getting a load from a bank requires collateral. Fortunately, since invoice factoring is unsecured financing, there's no need for assets that your lender can secure.

CONS:

There's not much to worry about when invoice factoring, but there are slight disadvantages that might be a concern.

• Cost - Sure, you'll get cash immediately, but you'll also give some in return. Depending on the lender, they could charge between 1 to 5 percent of your total invoice.
• Lack of Freedom - With invoice factoring, another company will take control of your invoices. If you're not comfortable with someone else having access to information about your finances, then invoice factoring could be a problem.

Invoice factoring lets you improve cash flow and pay your employees as soon as possible. The pros outweigh the cons, so consider invoice factoring if you want to obtain quick cash!

Make sure you'll lend your money to a reputable invoice financing lender in Singapore. Consider going to Aspire Financial Technologies if you're looking for a business line of credit.