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Common Myths about Factoring

Factoring, or financing receivables, is a great way for small businesses to maintain critical cash flow. Despite the many positives, there are still a number of misconceptions about factoring that may be preventing some savvy business owners from considering factoring. That’s to their detriment. The practice has been around for centuries and helps entrepreneurs eliminate some of the stress related to running a business! Here are a few myths that need to be busted about factoring companies in Alpharetta!

Factoring Can Break the Bank

This one common myth about factoring service in Alpharetta is easily dispelled. Though factoring invoices can sometimes cost more than the interest rate on a loan, most factoring service rates and fees are comparable to bank loans. Even better, a factoring broker in Alpharetta pays you in advance on your existing receivables for a nominal fee. This means you don’t have to worry about taking out a loan worth more than you need. There are a number of factoring service companies, which means you can shop around to find rates and fees that are easy on your pocket. And, unlike bank loans, the costs aren’t based on Federal Reserve interest rates, which means you have a greater opportunity to negotiate factoring fees.

Factoring Means All or Nothing

It’s a misconception that businesses who use invoice factoring services in Alpharetta must use the service for all of their invoices. That’s simply not true. Most factoring companies will require a steady flow of invoices from your business, but in most cases, you won’t be required to factor the invoices for all of your services. Some business owners choose only to factor a certain percentage of their invoices, while others only factor the invoices of certain clients. The goal of using a factoring service is to maintain a consistent cash flow. If that only requires using factoring of some of your invoices, most factoring brokers allow that.

Factoring Is for Start-Ups and Not Established Businesses

While it’s true a lot of start-ups can draw enormous benefits using a factoring service, factoring companies also service rapidly growing businesses of all sizes as well. For new companies, a factoring service can keep cash flow running through the business to pay bills and maintain inventory as they wait for outstanding payments on services already rendered. However, when an established business is poised to grow, factoring is a great way to finance expansion.

Savvy business owners look at all options when they’re launching a new business or planning to grow an existing one. Even the most reliable customers sometimes wait 30-90 days to pay on outstanding bills, but that delay can make running a small or growing business difficult. Whatever the circumstance, factoring services assist businesses in maintaining cash flow.