Invoice Factoring Has a Faster, Easier, Better Alternative
5 Reasons Why Accelerated Invoice Payment is the Best Alternative to Invoice Factoring Loans for a Small Business Needing Working Capital
Entrepreneurs, business owners, and stakeholders seeking an easy, speedy, and less risky infusion of working capital for their operations have reasons to avoid traditional loans and bypass the keepers of banking tradition in search of a better financial alternative.
Applying for a business loan can make anyone feel under a microscope. The sometimes long, drawn-out process can challenge your dignity, privacy, reputation, and peace of mind.
It’s what you can experience as you set appointments, sit down with decision-makers (if you’re lucky), and have all your business (if not personal) life laid out for judgment and possibly an embarrassing rejection. That kind of treatment sends some business people looking for a different way to raise working capital.
Alternative Business Financing Avoids Banker Hurdles for Easier Loans
Many business people simply don’t have the time, patience, long-established business set-up, or logistical breathing room to jump go from one loan attempt to another in the hopes of finding a solution that could take weeks, if not months, to happen.
Because the paperwork and waiting games don’t themselves provide the needed capital, entrepreneurs who need answers quickly and money immediately look to alternative funding solutions that work faster with fewer requirements than standard loans. One of the most popular options available is Invoice Factoring.
Why Invoice Factoring is So Attractive for Raising Working Capital for Small Businesses
When you perform services or provide goods to a customer on terms within which they promise to pay – be it 30, 60, 90, or other – and you provide them an invoice as a bill, that invoice is an asset that can be used to raise working capital for your business. As it is, the working capital you need is stuck in the form of an invoice as you await customer payment.
While you wait, the demands and stresses of business don’t politely slow down. Products have to be made, services provided, people paid, bills paid, not to mention anything having to do with local, state, and federal government taxes. When the cost of doing business eats deeply enough into your cash flow, that’s when unpaid invoices coming due serve as a convenient asset to convert into the money your business needs.
With an Invoice Factoring Company, you agree to let them purchase the value of your invoice, minus a fee percentage, and allow the client to pay the invoice amount to the factoring party. The benefits of this include:
- It is not a loan, not based on your personal credit profile, and requires no personal collateral. As an alternative financing tool, it also means far less paperwork and keeping the bank’s high-interest loan rates at a safe distance.
- You don’t have to have perfect business credit and can rely on the creditworthiness of your invoiced client to save the day. Because your customer serves as the financially responsible party, they pay the factoring company.
- Factoring Companies will pay 70 to 85% of the value of your invoices upfront. In many cases, this may be enough to cover most, if not all, of the business’s immediate operational needs. If not, the remainder (minus their fee) will be transferred to you after your customer has paid off the invoice, which might take up to 90 days, depending on the payment terms.
- Once approved, you can immediately use the money to pay staff, resolve bills, purchase new inventory and equipment, expand, or whatever pressing needs to take priority.
- Allows you to be flexible with more of your reliable, creditworthy, invoiced customers by offering some longer terms of, say, 60 or 90 days when they may previously be at 30-day terms.
In most cases, you get the money soon after the invoice is verified, whatever the initial upfront percentage they offer.
There’s no arguing the convenience of this option and how useful it can be for businesses in need of liquidating unpaid invoices to free up working capital. That said, it is true that factoring your invoice can come with some disadvantages, so let’s go over those and give you an even better solution to your cash flow crunch.
The Downsides of Invoice Factoring and the Alternative that Serves You Better
Despite being an accessible way to convert static invoices into liquid operating capital, there can be problems that will sour any entrepreneur who wants less paperwork, greater privacy, faster money, and no liabilities.
- Disguised Costs. Beware of hidden costs and opaquely-worded contracts by less-than-forthcoming outlets. These can involve application fees, credit check fees, late fees, and other disguised charges. Although the industry has cleaned up nicely in the past few years, you should still keep a sharp eye out for these tactics.
- Like any industry, some segments of Invoice Factoring have caused a bit of stigma to the practice because of less reputable providers. Recent regulations have helped stamp out a lot of underhanded behavior. Still, you will need to rely on your detailed research to find a transparent, above-board provider who looks out for your company’s best interests.
- Collecting the invoice amount from the customer is not written in stone, and some invoice factoring firms will obligate your company in the collection process. Lenders holding you or your company liable is called a Recourse arrangement and can put your peace of mind as well as profits at risk.
- Heavy reliance on factoring can impact your profit margins depending on the fee percentage. Higher-risk invoices with longer payment terms can cost you more. However, longer payment terms can be conveniently valuable from a strategic business perspective because that flexibility can keep customers on board.
- The fate of your business could lie in the hands of invoiced customers who, when undergoing the creditworthiness check, turn out to show weak credit scores.
- Many factoring companies will either decline the invoice or take advantage of the situation.
- Some will hit you with a higher fee. Others may even demand a ‘Recourse’ arrangement where your company can be liable for non-payment.
- That’s a heavy list of negative experiences business people can encounter when dealing with some invoice factoring companies. However, there’s a way to avoid all of that and still get working capital fast for your business and at no risk to you or your operation.
Why Accelerated Invoice Payments is a Better Alternative to Invoice Factoring
As an entrepreneur and business person looking for the benefits of invoice factoring without all the downside, NowAccount Accelerated Invoice Payments is your best solution. The Accelerated Invoice Payments system was made possible by experienced business veterans who have walked a mile in your shoes. We understand the position you’re in right now.
We have had our tension-filled days watching the calendar, and the clock hoping any customers in our stack of invoices would pay a bit early so we could use the cash inflow. We’ve also sat watching the calendar page get turned with no payment incoming from a late-paying customer.
When we needed money, we needed it fast, we needed to avoid jumping through hoops to get it, and we didn’t want to put everything at risk in raising working capital. We wanted a business financing experience that would help us keep our dignity and make us look good in the eyes of our customers.
Also, we didn’t want to be held personally responsible for any loan repayment. With all of that being so hard to find back then, we developed and built NowAccount Accelerated Invoice Payment system for business people like you who want the same thing: Ease, Simplicity, Dignity, Privacy, and No Risk.
- Immediately Improves Your Business Finances. NowAccount Accelerated Invoice Payments brings immediate fiscal relief to your business as you will have money available within one day after confirmation and approval.This means no operational slowdowns, getting people paid, bringing new hires on board, paying off utility bills, settling up with vendors, and getting hold of better equipment.
- There’s no complicated paperwork process as you would with traditional banks.The invoice is your calling card, and other than a non-invasive light check on the client’s creditworthiness, you won’t be put through the same obstacle course a bank would throw your way.
- NowAccount pays 100% of the Invoice Value minus a small fee.Some describe it as being like having your customer pay you with a credit card or using an ATM. Our low, flat fees make cash flow projections simple.
- NowAccount is a Non-Recourse, Low-Risk Business Financing Solution. You can rest easy when working with us because if your client fails to pay, we don’t hassle you to pay us. Even better, once we enter into the arrangement, you can relax while we handle the invoice for you as we help you maintain an excellent reputation with your customers.
- NowAccount works seamlessly with existing Account Systems like Quickbooks. We make it as easy as possible for you to get the working capital you require.
NowAccount provides a safe, fast, low-risk alternative to invoice factoring. It saves time, makes raising working capital easier, and serves as a reliable financial resource for your business.
NowAccount protects your business in the event of invoice non-payment. Solve your operation’s cash flow worries now with a working capital infusion through NowAccount using our simple & easy, 4-step process.
We’re excited to work with you to grow your business, get started by prequalifying, or reach out and book a time with our sales team if you still have questions!