Picture this: you’ve finally launched your new dream company, and business is booming. You’ve locked down a number of high-quality clients, you’re making sales, and you’ve got multiple customer invoices with sizable dollar amounts on them. In 30-90 more days, those invoices will become cash that you can actually use for your business. This is great, right?
But wait – while you’re waiting for your customers to pay those 90-day invoices, you still need to pay your employees and take care of your rent, utility bills, and other business expenses. As a new business owner, you may not actually have the cash on hand that you need to keep your business afloat while you’re waiting on those customer invoices to be paid out. So what do you do?
Invoice factoring is a cash flow management solution that helps business owners turn their outstanding customer invoices into quick cash.
Invoice factoring is when a business sells their customer invoices that are due and payable to a third-party firm, called the “factor.” The factor pays the businesses quick cash for invoices with future due dates, in exchange for a fee.
In other words, the business receives an advance on the amount they’re owed from their customer, allowing them to access the cash they need to meet their immediate financial obligations. Invoice factoring helps entrepreneurs access the cash they need right now, without waiting the standard 30-90 days for customer invoice payments.
Wondering if invoice factoring is the right cash flow management solution for you and your business? Check out the infographic below by MPStarFinancial for all of the benefits, terminology, and processes you need to know to decide if invoice factoring is the right solution for your business funding needs.