Factoring can be a great way to add working capital to your business when funds are tight. Although factoring is an alternative to traditional loans, it’s important to understand how factoring fits into your business goals to be successful. Ask yourself some questions about factoring before you begin.

Are You a Good Candidate?

Factoring works for all types of businesses that use invoicing. It’s not just for startups. Your business can benefit from invoice factoring no matter how big or how small you are. If you need quick funding, you might be a good candidate, but it depends on much more.

When Can Factoring Benefit You?

Factoring concerns itself with customer’s accounts. Your customers must have good credit, but they might pay late. If this puts you in a bind, factoring might benefit your business. The lender will also ask if your company is free of legal and tax problems. If it is, factoring could be a solution.

How Does Factoring Compare to Your Options?

Factoring is quick cash when compared to a traditional bank loan. With factoring, you can use the money any way you choose. You can choose which invoices to factor. You’re not giving up equity or putting collateral on the line. Consider whether other lending options offer these benefits.

Do You Understand Factoring?

Before signing a factoring contract, you should make sure that you understand your responsibilities. You do pay a fee to the factoring company for its service. While these fees can be higher than traditional loans, you have to think about the payoffs. Know what happens if your customers don’t pay the invoices. Some lenders offer non-recourse factoring, while others may charge higher fees if your customers don’t pay the invoices. Save a copy of your contract when factoring.

Contact Fast Commercial Money to learn more about factoring.