Invoice factoring is a financing method aimed at growing businesses that improves cash flow. This financing method is debt-free and should be flexible in order to accommodate the immediate cash flow needs of a growing business. Factoring is known for being growth-enabling. Partly, that is because invoice factoring can be such a flexible financing tool for small businesses.
Is Invoice Factoring Flexible?
Factoring works through a factoring company purchasing open invoices from a business and paying that business the invoice amount immediately, usually at a 1 to 5% discount. In short, factoring is flexible. There are pros and cons to any business financing option. There are also good companies and “not so good” companies in any financing space. If you sign up with a “not so good” company, you will likely lock yourself into a long-term contract with rigid terms, hidden fees, and little room for facility growth.
However, a good invoice factoring company that prides themselves on being flexible will be able and willing to review your financing terms. This means increasing your facility, lowering your factoring rate, and not hiding challenging provisions in legal documents.
Why Does Flexibility in Financing Matter?
Banks and traditional financing institutions are not known for being flexible. A line of credit at your local bank or an SBA loan may be your least expensive method of financing your small business, but there most likely will not be a lot of room for growth within that existing facility that you can access FAST.
Flexibility to Support Growth
Growing small businesses need flexibility in their financing picture. If you want to take on new business or larger orders, you need the cash ready to fulfill that. It takes money to make money.
Flexibility to Overcome a Drop in Revenue
Even businesses that are not actively growing would benefit from more financing flexibility. Some financing contracts have minimum volume requirements or banking covenants that would put you in default if your revenue falls. If an impending recession affects your business, you will want the flexibility in your financing to weather that storm.
Invoice Factoring Company
If you are considering factoring your invoices as a flexible financing method, be sure to read your financing proposal carefully and sign up with a factor that will enable your growth, not slow it down. At Eagle, we enable our clients’ growth by offering flexible solutions to your financing challenges. We can increase your facility size if you score a new customer. If you need extra cash while growing, we can lower your rates. We will not lock you into a long term contract with minimum volumes and hidden costs.
There are no hidden fees because we don’t believe in tricking business owners into signing up with us. There are no mandatory long term contracts because we don’t believe in forcing business owners into staying with us. We want you to sign up and stay factoring with us because of our great service and emphasis on flexibility.