There are a number of myths that surround invoice factoring about the process which, while widely debunked, are perhaps not as well-known as they ought to be.
Essentially, business invoice factoring will allow you to sell your invoices or accounts receivable on at a discount – which can allow you to obtain cash quicker than having to wait for money to clear from certain sources.
Here are five major myths about the process you need to know about before getting started.
- 1 Dispelling the myths around Invoice Factoring
- 2 Myth#1: Funding Invoices is Expensive
- 3 Myth#2: Factoring Firms Harass Clients and Customers
- 4 Myth#3: Factoring is an Option used by Businesses in Trouble
- 5 Myth#4: Customers Dislike Invoice Finance
- 6 Myth#5: I can’t use factoring if I have a low credit score
- 7 Myth#6: It is more expensive than an overdraft
- 8 Myth#7: Its quicker to get a business loan
- 9 Need further help
Dispelling the myths around Invoice Factoring
As a business owner you are always looking for new methods to manage cash flow and minimise the stresses of handling an organisation’s funds. Invoice Factoring has stepped up to the plate as an stress-free alternative funding facility which helps business owners leverage their unpaid invoices. This type of finance offers an instant cash injection directly into the company.
This system provides a solution where payments are collected on your behalf and managed by a team of expert credit controllers, so you can focus on the ‘bigger picture’ elements of running your organisation.
While invoice factoring has established itself as a viable funding option for growing businesses, there are still a number of outdated myths around the topic still remain.
We dispel common misconceptions and myths surrounding invoice factoring.
Myth#1: Funding Invoices is Expensive
This is a fairly major concern, and it can turn firms and business people off the idea of factoring completely. However, it remains to be said that factoring fees are decreasing gradually, and the overall cost of the process will largely depend upon where you may be in the process of running your firm. For one, while you are growing your business, it may be more prudent to consider factoring as opposed to avoiding opportunities or selling equity to make money so factoring is not expensive.
Myth#2: Factoring Firms Harass Clients and Customers
Another big concern of businesses entering into invoice factoring is that the third parties selling invoices too will be heavy-handed with their customers in receiving cash. It remains to be said that trusted experts such as Invoice Funding only ever follow legitimate, legal processes throughout factoring, and as such we are proud of our focus on customer service. Rest assured, your customers are always in good hands.
Myth#3: Factoring is an Option used by Businesses in Trouble
It can be easy to be put off by processes such as business invoice factoring as it may seem that it can be used as a last resort, or as an option for immediate cash in desperate times. However, it is more widely used by growing businesses with promising futures and for start-ups who are unable to obtain bank loans as a result of a lack of trading history. It is financial support that stimulates growth – not a crutch.
Myth#4: Customers Dislike Invoice Finance
Some customers may not understand the process of business invoice factoring right away, but the truth to this matter is, passing invoice collection over to third party experts such as Invoice Funding will allow you to spend more time developing professional relationships with your clients, and less time chasing them for finance. Clients can therefore expect a closer and more comprehensive service – and they will likely understand that you have a separate team or body in place to collect on invoicing.
Myth#5: I can’t use factoring if I have a low credit score
One great advantage of factoring over more traditional financing is your business doesn’t need to have a credit history to qualify for factoring. Lenders will rely on the creditworthiness of the business’s customers in qualifying it for factor financing.
Myth#6: It is more expensive than an overdraft
It is often believed that invoice factoring is significantly more expensive than a bank overdraft. As most high street banks offer Invoice Factoring and therefore access to ‘cheap’ funds. As your business goes invoice factoring grows with it, but is not capped like an overdraft.
Myth#7: Its quicker to get a business loan
Business owners think it is quicker to get a business loan that use an invoice factoring facility. this clearly is not true, factoring facilities can be in place within seven working days, business loans from high street lenders can take months to progress.
Need further help
Invoice Funding are one of the UK’s leading Factoring Brokers, we comprehensively analyse your case and are proud to be able to offer you an educated decision on your application for invoice factoring within a matter of days. While bank loans and financing can take months – we only ask for a few days at a time!
If your firm is in need of more efficient cash flow or is aiming to grow considerably over the next few years, Invoice Funding can and will help you. Get in touch with our team of friendly experts today through the contact form – and we will get back in touch with you.