May 29, 2024 11:48 am

Five Advantages of Factoring Companies Apart from Factoring

The advantages of factoring invoices are immeasurable. The majority of companies with B2B invoices are eligible, and you’ll receive an immediate infusion of operating cash that you may utilize as you see fit. Working with a factoring firm has numerous additional advantages, though, that have nothing to do with them. In the time it takes you to read this, we’ll go over some of the things factoring businesses can do for you that you probably didn’t know about, such the benefits and drawbacks of non-recourse factoring in comparison to regular bank loans.

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1. Credit Reports to Cut Down on Bad Debt

A major issue in why it’s simple to be eligible for invoice factoring—including non-recourse factoring—is that your company isn’t examined in the same manner as when you apply for a bank loan. This is a result of the factoring company’s increased focus on your client, who is the one accountable for paying the invoice. Credit checks are done to make sure they’re only advancing money on bills that are probably going to be paid in full and on schedule, which will improve your cash flow and lower your chance of bad debt.

According to CPA Practice Advisor, up to 10% of invoices are written off by small firms as bad debt. This implies that you may significantly boost your profitability and cash flow with only one solution.

2. Services for Collections to Cut Costs and Save Time

Almost all financing options demand that your company pay back the money it borrows plus fees and interest. Factoring differs in that you sell your factor the bills, and they take on the burden of collecting the outstanding balance.

The way this is handled is really customer-friendly; it’s almost like your billing is being outsourced. Because they are receiving exceptional service and your company is not burdened with unpaid debts, your clients are satisfied.

According to Intuit, almost two-thirds of small companies dedicate an average of 14 hours each week to administrative duties associated with invoice collection. When you deal with a factoring business, you can reallocate those 728 hours yearly to focus on strategy and key responsibilities inside your corporation.

3. Management of Accounts Receivable and Reporting for Improved Supervision

Small firms may find it challenging to monitor payments, the age of their invoices, and other issues. Another level of complexity is introduced by late payments, particularly when attempting to forecast cash flow and budget.

With factoring, you receive your money immediately, making budgeting and forecasting easy. Reports are handled by your factoring business as well, so you always know whose invoices are unpaid and who has paid. This is a Viva-powered digital service. Via your unique Customer Account Portal, you may access your account at any time of day.

4. Sector-Specific Benefits to Support the Growth of Your Company

Factoring businesses may have industry-specific specializations. This usually indicates that they are better than others at understanding your sector and can provide customized solutions to support you in managing a more robust and successful company.

For example, Viva is a multi-industry company that focuses in transportation. Additionally, our freight factoring customers are eligible for fuel advances and discount cards.

5. Different Types of Funding to Boost Your Company

One-size-fits-all business finance does not exist. In this regard, factoring is the same. Sometimes, a business finds that it isn’t the ideal answer, or as the firm expands, its demands alter. Knowing this, a seasoned factoring business provides additional funding options to assist guarantee that its clients’ demands are satisfied. Below are some instances of several funding options that Viva provides.

Reverse Factoring

When a firm with good credit requests reverse factoring, the factoring company pays the supplier’s invoice. This offers the company additional time to pay the supplier and guarantees that it will be paid on time even if its credit is not very good.

Lending Based on Assets

Your assets act as security for a loan under an asset-based lending arrangement. Working with a factoring business that understands your sector, such as Viva, is beneficial since we can provide finance against non-traditional assets and usually have a better understanding of the value of what you’re bringing to the table.

Cheap-Term Credit

When a firm need an infusion of working cash more quickly than a standard loan can be repaid, short-term financing is frequently the best option. Though they are often lower than regular loans, the loan amounts are sometimes sufficient to cover equipment expenditures, seasonal demands, or taking on more employment. As a result, there is a shorter payback plan.

Finance for Equipment

Equipment finance can be used by a company to purchase, rent, maintain, and repair its equipment. Because traditional lenders frequently struggle to determine the equipment value for certain businesses, they do not always offer it. But factoring businesses are more suited to assist, particularly those that have industry-specific knowledge.

Debt Financing via Venture

Certain factoring businesses, such as Viva, provide venture debt funding without requiring the lender to give up ownership, in contrast to the majority of venture capital choices that include giving up board seats.

Easy Pay Plans

By releasing the capital included in your invoices, quick pay methods let you guarantee that your staff is paid on schedule. For instance, Viva provides a Construction Quick Pay Program that enables general contractors to guarantee timely payment of subcontractors even in the event that the project hasn’t yet been fully paid for. Which subcontractors receive prompt payment and for which projects is entirely up to the general contractor’s discretion. The general contractor has the last word over whether to grant a subcontractor’s request for a payment advance through fast pay.

Programs for quick pay strengthen ties and confidence with suppliers. Additionally, they guarantee that materials are affordable for everyone and that projects are finished on schedule, saving the general contractor from having to pay for them out of pocket.