Factoring can be a great financial tool for your business.  Selling your accounts receivables (or invoices) to a factoring company (called a factor) can help your company get the money needed to maintain or grow your business.  Factoring is not for everyone as every business is unique.  The following are four scenarios where factoring may be a viable option .

Difficulties With Traditional Bank Lending - Some companies find it difficult to obtain a loan or a line of credit maybe because they lack sufficient collateral or do not have enough profitable history.  If your business is not able to acquire funding from traditional bank lending accounts receivable factoring may be one of the few options that is available for you.

Factoring Benefit: Factoring can help you get cash that your business needs without the hassle of trying to qualify for a loan.  You will not acquire new debt since you are selling your invoices - the factor collects from your credit worthy customer, not from you.

Challenges As A Start-Up or New Business - The early stages of a new business can be very challenging because start-ups or new businesses are generally cash poor.  This means that acquiring sales and being able to collect on them in a timely manner is very important otherwise the new business may die.

Factoring Benefit: Selling your accounts receivable to a factor is a great solution to ensure that cash can be available for new businesses.  A new business owner can focus mainly on acquiring new customers and sales while leaving the hassles of collecting to a factor.

Cash Flow Problems - Cash flow is the lifeblood of a business and without it you cannot meet payroll, pay supplies, or pay yourself.  Businesses of all types experience cash flow problems some time in their existence.  Unexpected events, increase in costs, or sudden growth can create financial stress for a business.

Factoring Benefit: With the right factor, a business can take advantage of factoring their invoices only when they need an immediate financial boost without taking on new debt.

Grow Your Business Quickly - Whether a small business plans to increase the scale of their business or is suddenly awarded a large long term contract, it must have the resources to satisfy the demands of growth.

Factoring Benefit: If a small business is bankable it can have more resources available to grow.  However, if a small business is not bankable, factoring can help satisfy the demands of growth with the ability to access cash immediately to meet a growing payroll or pay for more supplies.
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