Situations when factoring can save the company

Service Business

Invoices with deferred payment terms have brought financial problems to many entrepreneurs. Ultimately, it turns out that it doesn't matter how many contractors you have, but whether you have the right cash at the moment. Otherwise, you risk losing financial liquidity, debts and a complete lack of credibility on the market. However, there is a way to avoid this. Learn about 4 situations in which factoring can save your company's financial liquidity.

1. You work with a large contractor - check factoring

Do you run a small business, but you just signed a contract with a large contractor? Don't be surprised when your new business partner quickly requests deferred invoices. And it will not matter to him whether, as an entrepreneur, you have the means to pay for employees, your own suppliers, or to settle accounts with the tax office. So what can you do in order not to lose a lucrative contract and run into financial problems? This is where factoring companies and the factoring service they provide come to the rescue. Thanks to it, you will always have cash, regardless of the payment date requested by your contractor.

2. You are just starting to run a business

When starting your own business, you may have a lot of ideas and enthusiasm, but without proper financing, you won't do much. Of course, you can count on various types of subsidies, but often it takes many months for the decision and the transfer to take place. In turn, a business loan is not always an option because your creditworthiness will not be sufficient yet. However, the matter of factoring looks completely different.

Invoice financing is available even for completely new companies, because it is based primarily on your contracts with contractors and their financial situation. Therefore, if you want to dynamically develop your company from the beginning of its existence, choose factoring. Thanks to this, you will be able to invest more in your business and reduce the distance to the competition faster.

3. You start cooperation with a new contractor - reduce the risk thanks to factoring companies

The beginning of cooperation with a new contractor is always associated with a certain amount of uncertainty. After all, you do not know whether the other party will fulfill the contract and pay for the goods or the service performed on time. Especially when your cooperation is based on invoices with deferred payment terms. However, even in this case, factoring companies can help.

Remember that factoring is not only about financing invoices. As part of this service, you can also count on additional verification of the contractor due to his reliability in settling payments. Therefore, thanks to cooperation with a factoring company, not only do you receive cash faster, but also you can be sure that the payment will appear on your account on time.

4. You want to increase your negotiating position with suppliers - shorten payment terms through reverse factoring

Did you know that factoring can help you get better terms with your suppliers? As an entrepreneur, you probably realize that short payment terms are desirable by every salesperson. Not to mention paying in advance. In this case, the supplier can reduce the price as long as he receives cash as soon as possible. But where to get the funds to pay your own invoices, if you have to wait for payment from your contractors?

Of course, you can use traditional factoring as mentioned above. However, there is one more solution, which is reverse factoring. Such a service consists in financing purchases by factoring companies. In this case, your company buys the goods from the supplier and receives an invoice for it. Then you provide the complete set of documents to the factor, and the factor pays the payment to your seller. In turn, you settle accounts with the factoring company at a later date. And this way you have both goods, cash and a happy supplier. It is worth using this in subsequent price negotiations.

As you can see, the situations in which factoring is irreplaceable are very diverse. This is mainly due to the high flexibility that characterizes this service and the factoring companies that offer it. It all comes down to the fact that you never run out of money when you have to pay for your own expenses or necessary investments in the company.

 External text, partner's article