Recovering From Rough Times: Is Invoice Factoring Possible?

It’s not unusual for a company to experience some type of temporary circumstances that damage credit ratings or otherwise cripple the ability to secure loans or lines of credit. That can leave the business owner struggling to make do with cash flow that trickles in and may not always show up in time to pay vendors. While it may seem that there is no other option, the business owner would do well to talk with a funding partner who offers services like invoice factoring.

Will Funding Partners Be Interested?

One of the reasons this approach is so helpful for businesses that have gone through some sort of temporary reversal in fortunes is that funding partners are primarily concerned with the stability and the creditworthiness of the company’s customer base. It’s already apparent the business will need time to rebuild that damaged credit rating. What the partner focuses on is how quickly the customers will remit payments for the invoices that the partner chooses to purchase.

This means that if almost all of the customers remit payments within 30 days of the billing date, the funding partner will consider setting up a factoring arrangement a reasonable option. The risk is minimal since the customers are so consistent with their payments. The risk is further mitigated because payments are sent to a lockbox address supplied by the funding partner. Thanks to this approach, the partner recoups the funds advanced to the business owner fairly rapidly and still manages to make a reasonable return on the arrangement.

What About the Business Owner?

The funding partner is not the only one to benefit from this strategy. Most of the invoice batch’s face value is released to the business owner within one business day of receiving copies of the invoices. The remainder, less a small percentage retained as payment for services rendered, is released as more customer payments are received. Thanks to this approach, the business owner has operating funds on hand early in the month. That makes it easier to allocate funds for payroll, general operations, and even to pay vendors on time. The result is positive comments on credit reports that help rebuild the corporate credit score.

Talk with a representative from a funding company today. Establishing an arrangement will be easier than most business owners realize.