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Is your business eligible for invoice finance?

Factoring is a flexible way for all sorts of businesses to access finance – but how could it help you and your business, and are you suitable? If your business sells on credit to customers via invoicing then the answer is probably yes. So what kind of companies are best suited to this increasingly popular form of alternative finance?

Invoice factoring is especially well suited to companies which are experiencing rapid growth. Typically, fast growing companies need a lot of available working capital in order to achieve sustainable growth, with good cash flow to allow them to invest in new growth plans quickly. Factoring can provide this, as well as allowing companies to pay their suppliers before their customers have paid off their invoice; the invoice lender will release the majority of the value of the invoice often within 24 hours.

Though many types of business are eligible for factoring services, some of the most preferred business types for lenders are the ones where proof of delivery is easily obtainable. Factoring companies need to know that the company they’re lending to is sending them genuine invoices – as such, businesses which deliver physical goods in return for a receipt are some of the best companies for factoring lenders. Most manufacturing or distribution businesses would, therefore, be suitable for the service.

Service businesses, however, could also make use of factoring. An increasing number of factoring lenders have branched out by offering their services to recruitment agencies or even advertising and publishing companies. Often, there is not set ‘yes or no’ list of businesses eligible, so if in doubt, ask. The one thing that’s necessary is the issuing of invoices to customers through credit terms – as such, retail businesses aren’t suitable.

As is quite often the case, smaller lenders can be more flexible than larger banks. Smaller companies may be more willing to think outside the box or offer your business a factoring plan even if you think you might not be eligible. As such, it’s worth doing your research – not all factoring lenders are equal!

 

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