If you’re thinking about factoring your invoices, it’s important to know all the facts before you commit. This guide will dispel some of the myths that surround invoice factoring and help you better understand how it works, including how you can use invoice factoring as an alternative to traditional financing and how invoice factoring companies can finance as much as 90% of your outstanding invoices. Here are three myths about invoice factoring that you need to stop believing right now.
1) Myth: It’s too expensive
While factoring can be more expensive than other sources of funding, it isn’t always. Sometimes business owners choose not to look into it because they believe that factoring is always costly. This isn’t true though. The company that does your invoicing or line of credit may offer you a lower rate than someone else, so don’t assume that one factoring company will be pricier than another without checking first.
2) Myth: It takes a long time
If you’re selling on credit, you need to send an invoice every time you sell a product. If your clients don’t pay within 30 days, it will take even longer if they choose to pay using traditional methods like ACH or check. Invoice factoring can help speed up your cash flow by eliminating such delays and skipping right past them. At last check, it only takes one business day for funds to be released in a factoring transaction.
3) Myth: I already have financing
If you are asking your customers to pay upfront, they can, but that’s a loan. If they pay you in 30 days, that’s financing. If you already have loans in place and you’re wondering if factoring would be a good idea for your business, it probably isn’t going to be.