In business financing, a line of credit is much better than online factoring. It is cheaper, easier and faster.
The Mathematics behind Online Factoring
Online factoring is essentially a business agreement between a company and a lender. A business wants to sell an invoice to a financing company in exchange for getting cash right now. This comes in handy when you need to pay your bills right now but you give your clients 30, 60 or 90 days to pay you.
The online Factor will advance you up to 80 percent of the price of the invoice. Your clients will now send the full payment amount of the invoice to the factor when their payment is due. The factor would then keep 10 percent and the remaining 10 percent they send to your company.
The Problems with Online Factoring
This process seems very straightforward. Unfortunately, there are numerous issues that make this a less than ideal option for small business financing.
First, there is no online factoring because a true factor will need to call your clients to make sure the invoice is real. They must also make arrangements to ensure that all payments are sent to the factor instead of your business. These matters are typically handled offline.
Second, a factor will only factor an invoice when the company paying the invoice is credit worthy. In other words, your clients must be financially stable with a solid credit rating. If not, they will not accept that invoice or give you money for it.
This can prove problematic if you usually deal with other small businesses. Those businesses are probably in the same boat you are in, struggling to make ends meet. Therefore, you might have tons of invoices with no way to get fast business cash for them.
Lastly, your clients will now know that you are working with a factor. This is a red flag showing that your company is in financial trouble.
Why is Online Factoring Simpler than Other Types of Business Funding?
The truth is that the business practice of factoring has been around for thousands of years. With the prevalence of the Internet, it’s now easier than ever to find online factoring for your business.
As a result, there are numerous alternative lenders out there that now offer online factoring as part of their services. This is often an addition to their typical lineup of small business loans, debt consolidation and lines of credit.
What is the Best Alternative to Online Factoring?
You might believe that online factoring or small business loans are your only choices you have to save your business. Thankfully, there are other options.
A business line of credit from Financing Solutions (www.financingsolutionsnow.com) is a much better alternative. You get the money you need for growth and survival without all the hassles.
For one thing, Financing Solutions will never call your clients. They base their funding decisions solely on the strength and circumstances of your business.
Best of all, they make it easy to get your line of credit. Their online application takes only minutes to complete. Also, you can repay the line instantly or quickly over time.
You will also find that this short term business funding is cheaper. In fact, it costs nothing to set up and keep in place. There is no charge at all until you actually use the money.
When it comes to immediate business financing, time is of the essence. Every business should have a line of credit just in case.