It’s crucial for small businesses to have constant access to financing. However, small businesses find it hard to qualify long-term funding due toa number of reasons such as bad/no credit, weak cash flow, lack of collateral, lack of preparation, and risk-averse banks. Fortunately, invoice financingis a great alternative to traditional financing.

Invoice financing is technically not a loan but rather a business transaction. Small businesses with accounts receivable sell their invoices to private lenders or factoring companies in exchange for immediate working capital.

Many businesses opt for invoice factoring to accelerate cash flow instead of waiting for days or months before getting paid. This type of financing is similar to a business line of credit, when your invoices are paid, your balance decreases; when you sell new invoices, you can draw more money.

Invoice factoring is great in bridging the gap between accounts payable and accounts receivable. The funds you receive can be used to help with daily business expenses and for growth and expansion. The terms and fees of your funding depend on the lender you choose, strength and credit of your business, and most importantly, the credit score of your customers.

Aside from providing immediate working capital, invoice factoring offers additional benefits for your business. When you partner with the right invoice factoring company, invoice factoring will open up a host of other advantages for your business.

1.    Invoice Factoring Improves Cash Flow and Adds to Working Capital without Borrowing Money

Since invoice factoring is not a loan, businesses are able to receive funds with minimum credit requirements. You’ll be able to build your working capital without harming your credit, incurring debt, or negatively impact your credit rating. If you apply for a small business loan from banks or other loan-based lenders, the loan will affect your credit score.

2.    Strong Financials Are Not Necessary

Unlike traditional loans, you don’t have to have a great personal or business credit score, a minimum number of years in business, or a strong financial history to qualify for invoice factoring. Factors or lenders focus more on your customers’ financials since they’re the ones paying for the invoices. This is great news for businesses with low credit scores or businesses trying to build (or rebuild) their credit rating.

3.    Easier Qualifications

As mentioned, it’s easier to qualify for invoice factoring because it’s technically not a loan. If your business has a significant amount of pending invoices, you’re more likely to get funding from invoice financing. Major qualifications are based on your customer’s creditworthiness. So as a business owner, make sure you restrict your credit sales to creditworthy customers.

If you’re looking into invoice factoring, SMB Compass provides you with the funding you need to take your business to the next level. Our invoice factoring program offers:

  • Fast funding
  • Low-cost, secured financing
  • No interest or principal payments

SMB Compass offers various loan programs for businesses all over the United States – yours included! Don’t hesitate to contact usby phone at (646) 569-9496 or email us at