WHY INVOICE FACTORING MAY BE BETTER THAN A BUSINESS LOAN

There are a number of funding options out there, but many will depend on the age of the company and their credit history.

According to The Service Corps of Retired Executives (SCORE), 82% of Start-ups and Small Businesses fail because owners have a poor understanding of Cash-Flow Management and lack the ability to access it at required levels to fund their growth!

One option that is available to them is invoice factoring, or invoice financing (with some differentiations). This type of financing mostly requires that a company has customers who typically pay within terms and have outstanding invoices. Below, we will take a look at why invoice factoring is better than a business loan and when a company might be best served using this type of financing.

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No Debt Added

Factoring does not require a company to take on additional debt. While it is often necessary for businesses to borrow money in order to get started and stay afloat, it is generally accepted that the less debt used, the better your Balance Sheet, Financials, Ratio’s and Investor Perception. Having debt makes it harder to get loans in the future, debilitates an organization’s leverage, and also puts a lot of pressure on companies to pay it back. Factoring allows companies to receive needed capital without the hassle and risk of using a loan.

Quick Funding

If a company needs money fast, there are few better options then invoice factoring. In less than 5 days, a company can receive up to 90% of their outstanding invoices. After initial funding, SouthStar can provide funding within 24 hours of receiving an invoice. This makes it a perfect option when a company needs a quick infusion of cash, needs to manage cash flow, or wants to ensure they are reporting the strongest financials they can.

Simplistic, Fast Process

In order to receive a bank loan or a line of credit, it is necessary to provide a number of proofs that you are a good credit risk. A company will need to provide all of their financial statements, have very good credit, and have been in business for a good amount of time, generally more than 3 years. In contrast, invoice factoring lenders’ biggest concern will be the credit of the entity (debtor) that owes on the invoice. This non-traditional approach takes a lot of pressure off the company in need of money.

No Debt to Payback

Because the money advanced is not a loan, it does not have to be paid back. As a result, there are no payments, principal, and interest to be made. The invoice is paid back by your debtor when payment is due and they receive no hassle about early payment, in turn increasing customer satisfaction.

SouthStar Handles Collections

Not only will Southstar Capital advance the company a lump sum of money up-front, they will also handle collection duties for ALL invoices (even invoices not being factored). For businesses without a collection department, this provides a much needed and valuable service. For companies with a receivables department, this provides a HUGE savings that mitigates or eliminates the cost of financing, as well as, eliminates the need to offer discounts for receiving payment sooner than credit terms agreed upon. Therefore, lowering or eliminating the financing costs.

Call or email us today if you’re interested in learning more about Invoice Factoring versus a Business Loan.

how does factoring work

How does Factoring with SouthStar Capital work? Learn more about our complete funding process, from sending an invoice to receiving the working capital your business needs.

Factoring Example

Find out what our clients are saying about Factoring with SouthStar Capital. Plus, real life success stories on business growth with Invoice Factoring.

History of Factoring

Factoring goes as far back as Babylonian times! Follow how factoring has changed through time and become a present day form of alternative lending.

Factoring

Learn what Invoice Factoring is, how it can benefit your business, and the advantages of working with SouthStar Capital.

“After being turned down by five banks, we accepted the fact that we would have to pass on the project. Then SouthStar Capital met with us and put together a finance strategy for getting us the cash we need. They had all the answers to our questions, and their rates were very reasonable.”

– Doug, Owner of a Steel Fabrication Plant