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How to Finance Your Small Business with Invoice Factoring

Having cash on hand is not always an option for small business owners. Invoice factoring or invoice financing can provide the cash you need against your existing invoices. Instead of collecting the full amount of an invoice and waiting for that customer to pay, you can sell the invoice to a factor at a discount. A factor or lender advances the necessary cash at the discounted rate. The factor then bills and collects the full amount from the customer. They take their fee off the amount paid and the remaining amount is then remitted to the business.

 Invoice factoring allows the company to obtain the necessary cash without adding debt to the company. Another benefit is the ability to obtain the money without applying for other forms of financing that can take longer to approve. No collateral is required, and the company’s credit scores are not the main factor in determining approval. Rather, he customer’s credit scores and payment history are the key components factors look at when deciding. This is a great option for small businesses who may not have the best credit scores themselves. Review the terms of any contract before signing. In addition to the factor’s collection fee, many also have fees for credit checking, processing, late payments and other situations.

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