While a stockpile of outstanding invoices might look nice on your financial statements, you can’t exactly pay your bills or take advantage of new opportunities with your accounts receivables. In order to grow your business, you need access to cold hard cash—it’s that simple. Factoring is an option, but is it really the one you want?
Though they need funds, many businesses are hesitant to take out loans for a number of reasons. Maybe they don’t want to incur debt, don’t want to put up collateral, or don’t have the time to endure a drawn-out application process, among other things. As a result of this loan aversion, some business owners turn to legacy invoice factoring services to get the money they need.
Quite simply, factoring is the process through which businesses sell their accounts receivables to third parties. While factoring can certainly help companies overcome short-term cash gaps, there are a number of reasons why the particular financial tool is less than optimal:
Factoring is expensive
First things first: The average factoring company charges anywhere between 28% and 60% APR. On top of that, factoring companies generally advance somewhere between 70% and 85% of the cost of the invoices. So in addition to incurring hefty fees, you also lose immediate access to a significant chunk of your receipts.
It can be embarrassing
When you partner with a factoring company, that organization owns your invoices. This means that your customers will repay the factoring company directly—not you. The factoring company also handles collections, so it brings your cash flow struggles right out in the open for everyone to see.
Your business loses agility
Many factoring companies are keen on locking their customers into long-term contracts. Even if you’ve grown your business and are ready to move on, the factoring company may want to keep its tentacles in you longer than you’d like.
There’s good news: Instead of paying more than you need to pay in order to regain control of your finances, you can use an invoice financing service like Fundbox to solve your cash flow problems and take your business to the next level. With Fundbox, you won’t have to worry about hurting your reputation or relinquishing any control of your operations either.
Here’s how it works: Create an account and connect your accounting software to the service. The whole process should take less than a minute. Once that’s done, start importing your unpaid invoices right away. Choose whichever invoices you want cleared, and Fundbox will immediately transfer the funds—the full value of the invoice—to your account within a business day. You then have 12 or 24 weeks to pay the advance, plus a small fee.
Fundbox’s costs are extremely reasonable—just check out our transparent pricing policy. We don’t get between you and your customers, and we’ll never tell you how to run your business. If you’re in need of a cash infusion, there’s no sense in sacrificing any more money than you absolutely must in order to get the funds you need to grow your business. Thanks to Fundbox, you won’t have to.