When you run a business that caters to a lot of credit clients, there are times when you need ready cash to meet your daily expenses or even to fund your expansion plans. You may be hoping for a way to unlock your money that might be locked until due date of your invoices. The following conditions can provide you with hints to estimate the right time to opt for business factoring.



When Your Cash Flow Is Choked. If you find that you have supplied your products or services to reputed clients and even earned a high profit margin, but are unable to arrange for timely finance to meet your regular expenses, then business factoring could be the ideal solution. These factoring companies can purchase your credit invoices and wire that invoice amount to your bank account within 1 or 2 days minus their factoring fee, which could be in the range of 1.5% to 5%. This could immediately put an end to your cash flow woes and you could meet all your expenses. If you have quality clients, providing a credit period of around 30 to 60 days and provide a high volume of business to your factoring company, then you could get away by parting with a very reasonable factoring fee.

When Banks Do Not Give You That Loan. If you find that banks are not willing to advance you any loan due to non-availability of collateral or guarantees, then business factoring could help you. If you are a start-up company, then you will not be able to provide the mandatory 3-year financial statements that banks usually require. You will also realize that banks will only loan you a fixed amount for a fixed term and you will need to pay back the loan within that period in fixed monthly installments. If, during that period, you require some additional funds, then you may find yourself in a quandary.

Angel Investors or venture capitalists might provide much-needed funds, but they come along with their own set of conditions. But on the other hand, business factoring will provide you the funds against invoices that have already been issued. Thus, if your invoice amounts are large, then the amount you receive will also be substantial. The beauty of business factoring is that it will grow along with the volume of your business. You do not have to worry about any monthly installments or penalties for late payments.

When You Want To Expand Your Business. You will require additional funds if you want to expand or cater to large orders. If you do not have ready funds then you could be financially crippled and end up frustrated. Business factoring can provide these funds and you could thus be able to cater to larger orders. You can also go in for bulk purchases that would further reduce your purchase costs, thereby leading to higher profit margins.

If you have a reputed credit client list and are supplying products maintaining good profit margin, then you could opt for this flexible financial option that has the ability to keep up with your increasing business needs. Thus, if you feel that the above factors are restricting your business, then go in for business factoring to improve your cash flow and expand your business.