There are many reasons why a small business might need a quick influx of cash. From an unexpected major expense to a slight lull in sales before the busy season starts, many companies can have a high-quality business plan and strong day-to-day operations but still need some extra funds.
Factoring is a useful and efficient option for small businesses that traditionally have a delay in the payment of their invoices. By using those invoices as collateral for a loan from a financial institution, these companies eliminate the latency usually present in their accounts receivable and access the money they need to continue operating as normal.
Why is factoring an attractive option?
Factoring offers a number of advantages when compared to other forms of small business lending. One of the clearest is the presence of collateral that’s easily leveraged. Instead of putting up an asset integral to operations to secure the loan, you simply use existing unpaid invoices to fill this need. That means less worrying about paying off the loan, as the debt owed to your business by customers already exists and is clearly documented by the financial institution providing the line of credit.
Another one of the major benefits of this form of lending is the speed with which some banks can provide the funds your business needs. For example, TAB Bank has an approval timeline of just minutes, with same-day delivery of funds. That kind of quick access can make a big difference for small-business owners who may need to address an unexpected expense or act on a major opportunity before too much time passes.
Why do businesses turn to factoring?
Many small businesses have lots of room to change, develop and grow in their chosen industries. Sometimes, the right opportunity could mean major growth down the road, but also carry a significant price tag up front. Similarly, there are unforeseeable emergencies that must be addressed quickly before spiraling out of control. In both cases, your enterprise needs money right away to handle the emergent issue and continue moving forward.
Although your business has money owed to it by customers, it’s difficult if not impossible to go back on an established tradition of payment after 30, 60 or 90 days. Even if you customers agree to pay early, such a request can leave them with less-positive feelings about your business, which carries negative consequences.
Instead of pursuing this difficult approach, consider turning to factoring. As a line of credit, you can use it for nearly any business purpose. That means the money isn’t tied to any specific project or need, offering a high degree of flexibility that doesn’t limit how you spend. No matter what type of business you operate nor the specific, short-term financial needs that lead you to factoring, this form of small business lending props up your operations in a time of need and keeps your business looking toward the future.
To learn more about factoring, get in touch with TAB Bank to apply and meet your dedicated relationship manager today!
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