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Guide to Factoring

As a business owner you know there are many financing options for your company. The options for generating cash-flow can be time consuming to research and hard to identify which option suits your company best. We’ve highlighted several reasons why you would want to use factoring as your choice to help grow your business.

Why use Factoring?

Factoring is Flexible

Factoring can be used on a per-invoice basis, making it one of the most flexible ways to generate cash. If your business is cyclical with periods of high or low sales, you can choose to factor more or less invoices.

Factoring Uses Customer's Credit

Whether or not you can qualify for factoring depends mainly on your customers. This can be a real asset to newer companies with little credit who are selling to large established companies.

No Debt

Factoring is not a loan and doesn’t require taking on more debt. As long as your customers pay their invoices there are no extra monthly payments.

Quick to Set Up

If you have landed a large order and do not have the cash to cover it, factoring can allow you to get paid on open invoices immediately. This allows your company to fulfill the order and continue to grow.

Targeted for Growth

Factoring may be the perfect solution if your company has many profitable opportunities but is struggling to grow due to the time it takes for your customers to pay. Factoring stabilizes cash flow and allows your company to focus on growing, whether through sales, marketing efforts or expanding workforce.

No Equity Strings Attached

With invoice factoring, there is no need to bring in investors allowing you to maintain your current level of ownership.

When to use Factoring?

Here are a few quick examples of situations where factoring can work well for a company.

  • A company whose avenues for borrowing money have been tapped but is still trying to grow.
  • A company who is experiencing rapid growth and is looking for a short term cash flow solution.
  • A company who sees opportunities for expansion into new markets but needs cash to make it happen.
  • A company whose clients take too long to pay and is looking to close the gap between paying suppliers and getting paid from customers.
  • A company who may be losing money at their current sales performance and needs additional funds to grow the company to a profitable level.

We hope you enjoyed this quick refresh on factoring. If it looks like something that could benefit you - please visit us at evergreenwc.com or LinkedIn.

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