In short yes. There is a criteria to be followed, as there is with all financing options.
Invoice factoring has been gaining popularity as a tool to finance growing businesses. It is a solution that accelerates payments from slow paying clients, freeing up cash flow and allowing companies to grow. The use of factoring effectively expedites the waiting time that makes so many business owners giddy and/or restless - with a reassurance that they would get their money, they know that they can make their company grow at the rate they would want it to grow.
But take note factoring does not apply to everybody. We shall now discuss in brief the criteria financiers use in determining whether a company qualifies for factoring.
Your business must be established and your clients must be commercial or government entities only.
Profit margins must be no less than 12 percent.
Your biggest problem must be that clients are taking too long to pay their invoices
Provided your business meets the above criteria, then factoring financing would indeed be a worthy business financing solution. It may not be as inexpensive as a business loan, but certainly will be significantly more flexible and easier to obtain.
Factoring would be advantageous if:
You are not able to fulfill all of your orders due to a paucity in cash flow.
If you are missing payments such as rent and payroll because your cash cannot quite cover it.
Factoring transactions are relatively simple. After invoicing your clients, you would then sell your invoice to the factoring company, who then advances you about 85% of the invoice cost, or somewhere around that percentage. The remaining 15% or so serves as a buffer in case of invoice-related disputes. Within the next day or so, you would be able to use the funds, as the factoring company waits to receive payment from your clients. Once the client pays the invoice, the factoring company will rebate the 15% less their fee.
Factoring costs can vary depending on your financed volume, credit quality of your clients, payment cycles and industry. Generally speaking, factoring will cost 1.5% to 3.5% per month. However, many factors have started pricing in spans of ten-day intervals, which simplifies things and makes factoring even more enticing to businesses. For example, if a factor charges you 2.7% on a monthly basis, using these ten-day increments you would only be charged 0.9% for the duration the invoice is outstanding.
As you can see, invoice factoring is a reasonable alternative to other financing products, provided that you can meet certain criteria. As long as you have commercial or government clients with a high level of credit worthiness, you should have little problem qualifying for invoice factoring.
Each the granite edge polisher you will need for your natural stone manufacturing organization is located in a single location. Our large selection of brand new and previously owned machinery is changed constantly.