Discount factoring

Does your business suffer because you frequently have to wait 30 or 60 days for clients to pay their invoices? In today's fast-paced business world, delays in invoice payment can lead to the downfall of a small business. Discount factoring services is one solution that could put immediate cash in your hands to help keep your business thriving.

What is discount factoring?

A factoring company will pay your invoices before your clients do, taking a portion of the profits off the top while allowing you to meet your short-term financial commitments. Small businesses in particular benefit from discount factoring because the rates are lower and money cycles through the business faster than it would through a small business loan.

There are many benefits to using discount factoring to improve your business workflow.

Easier approval

If your business doesn't have a strong credit history, discount factoring will allow your accounts receivable department to run without resorting to bank loans or lines of credit. If factoring companies look at your credit at all, they do so with far less-stringent criteria than banks and other financial institutions.

Meeting payroll

One of the main struggles small businesses face is paying their employees on time without difficulty. If invoices are paid a month or two behind schedule, you could struggle to process employee paycheck. A factoring arrangement relieves you of payroll worries so you can meet your obligations to your staff.

Take advantage of short-term discounts

Many vendors provide discounts on products and services if you take advantage of offers quickly. When you work with a discount factoring company, you’ll have immediate cash flow to take advantage of these opportunities. In addition, showing an ability to pay your own invoices right away can lead to better relationships with your vendors.

Easier monitoring

Any business can experience times of peak sales growth and periods of decreased revenue. It’s difficult to track these patterns when your invoices are paid on varying schedules. With factoring, you'll be able to track each peak and valley without going back to see when individual orders were filled. In addition, your increased inventory needs can be immediately met during peak seasonal sales.

Types of factoring services

Discount factoring companies typically offer two options: recourse factoring and non-recourse factoring. Recourse factoring sets a time limit for customers to pay their invoices, and you’ll have to refund part of the cash you get if the invoices aren’t paid. With non-recourse factoring, the company assumes the risk but will charge a higher rate for their services.

Hiring a discount factoring company can help you determine the creditworthiness of your customers relieve you of having to go after your customers for payment. BuyerZone can help your company with a request for factoring quotes service that will match you with multiple factoring companies – for free.