Operating a successful business often requires reinvesting back into your business. If you are short on capital and have applied for a bank loan only to be turned down because of bad credit, it is important to be aware that it is possible to obtain best business financing with bad credit. While many banks have tightened their lending restrictions, bad credit finance companies can provide business owners with the capital they need to give their business a boost. Whether you are interested in expanding, ordering, inventory, or you simply need a little extra cash to tide your business over during a dry spell, there are options available, including invoice factoring.
By factoring invoices, your business will be able to receive an immediate cash payment for your outstanding invoices. Furthermore, the factoring company will collect payment from your customers and then release the remainder of the invoice balance, less a factoring fee, once payment is collected.
Unlike a loan, invoice factoring is based on the purchase of your outstanding invoices at a discounted price. Rather than waiting weeks or months to receive payment, you receive payment on those invoices right away. In most instances, you can receive access to your funds within 24 to 48 hours. Compared to the weeks or months that it often takes for a bank to make a loan decision, this is a tremendous advantage. Also, since factoring is not actually a business loan, you are able to obtain the cash you need without taking on any additional debt and adding to your business’s liabilities.
The terms of factoring are also quite flexible and involve no minimums, maximums, or long-term contracts. Among the benefits of factoring is that it is scalable and can grow with you according to your business needs.
Business owners will also find that the fees related to invoice factoring are also quite reasonable. In fact, the costs of factoring have declined quite significantly in the last few years, although they do vary based on several factors, including customer credit worthiness, number of invoices, and the length of time it takes for customers to pay. Compared to the interest rates of a traditional bank loan, factoring can prove to be an affordable option for business owners to obtain the funding they need.
There are also no rules regarding how the funds from factoring can be spent. Business loans often must be used for specific purposes. This is not the case with factoring. There are no requirements for purchasing assets, such as equipment. The business owner stays in complete control and may use the funds, however he or she wishes. Funds can be used to pay taxes on time, meet payroll, or pay bills. It is not uncommon for many business owners to use the funding received from factoring to negotiate bulk discounts, benefit from early payment discounts, add to their staff, fund expansion, or kick start a marketing campaign.
With invoice factoring, business owners can receive business financing with bad credit to keep their businesses operating efficiently.