Advantages of using Invoice Factoring Companies

Invoice factoring is the ultimate way for business to acquire finance which vehemently helps in expansion and promotion of business. Contrary to promotional loans which takes immense time, this form of finance is easily available without any hassles of paperwork and complicated documents like financial statements. Going for the invoice factoring companies can further abridge the process.

The primary factor in going for the invoice factoring companies is that it is faster and quick than traditional process. A business involves selling of products and services to customers and based on that invoice is created. While taking up services of this form, this invoice is sent to the invoice factoring company where they are thoroughly verified and based on that they allow finances to the extent of 85 percent of the invoice value. Once you sent invoice to the factoring company, the verification and payments takes place within a day or less than 24 hours.

Further once a business is with factoring companies there is no need for debt collection because the factoring company does it for a meagre amount. They itself collect debts from the debtor and thus business saves huge amount of dollars and time that is usually spent in calling up debtors. The invoices are sent to the factoring company so they perform the task of calling up debtors and collecting payments from the debtor. Businesses can benefit immensely from these companies due to huge time saved and they could focus on other core issues of business. Even employees can be redirected towards other departments such as sales or customer support. This amounts to more rigorous growth for the company with more satisfied customers.

The inclusion of factoring companies escalates financial health of the business. The company becomes self sustainable as it no longer depends on the internal cash flow to satisfy their creditors. It wins the confidence of investors and stabilizes cash flow within the business.

However it's not always easy to acquire services from the invoice factoring company as it seems. In order to get services, one needs to fulfill certain criteria's so that one can take help from invoice companies. The most vital part is that a business should deal with commercial customers and should have some sort of profits may be in the near future. Profit is vital factor here because invoice factoring companies would not join hands with a business that is running into losses. After all these factoring companies are thriving to make profits too. So, its must for businesses to have profit margin greater than 20 percent. 

The payment to the invoice companies is done in two phases. The first phase or the first installment is done soon after all invoices are submitted and that should account for 60 to 90 percent of the total value of the invoices. The second installment is given when clients clear all the pending payments. The factoring fee gets deducted in the second payment.

Invoice factoring companies are great way to enhance your business efficiency and profits.