Having good credit as a business owner is crucial for securing financing to maintain operations and invest in growth opportunities. However, it’s not uncommon for businesses to have less-than-perfect credit, especially if you are still in the process of establishing a credit history as a newer business. 

If you are struggling to get the financing or working capital you need, invoice factoring might be the answer to your cash flow problems. 

At Midwest Business Funding, we provide tailored factoring services including business factoring for bad credit. Speak with a strategist at +13176063595 or fill out our web form to learn more. 

Business Factoring for Bad Credit 

Business factoring is a prime option for businesses with bad credit. With factoring strategies, also known as invoice factoring, a business’s credit history doesn’t affect a decision. Instead, this solution is based on customers’ creditworthiness. 

When using invoice factoring as a financing solution, a factoring company will look at the strength of customers’ credit. Factoring works by using customers’ unpaid invoices to get cash upfront. 

The factoring company offers a percentage of the invoices owed. They are then responsible for collecting that money from the customers. After it’s collected, the factoring company subtracts a nominal fee and then sends the rest back to you. 

How Invoice Factoring Can Help with Bad Credit

Unlike traditional business financing options, invoice factoring allows access to funds already owed without creating more debt, which is why credit score isn’t a factor. You get an advance on overdue invoices while the factoring company handles collecting that owed money from customers. 

With immediate access to that cash, overcoming bad credit challenges becomes easier. For example, use the money to pay off other business debts, stay on top of daily operating expenses, or invest in growth opportunities and increase sales. All of these can improve financial standing, enabling better financing down the road.

Factoring with bad credit also places credit risk on the factoring company. When you sign an agreement with the factoring company, a section that outlines what happens when invoice non-payment occurs is included. In most cases, this means keeping the money advanced to you even if customers don’t pay their invoices. 

As a whole, there are several benefits of business factoring for bad credit, including:

• Improved cash flow 
• Quick and reliable funding
• Easy qualifications
• No debt incurred
• Outsourced collections

Business Factoring Strategies for Bad Credit

Two types of invoice factoring strategies can help your business overcome bad credit challenges:

• Full recourse invoice factoring: With recourse factoring, you assume the risk if the customer doesn’t pay their invoice. This means at the end of the contract, you will buy back any unpaid invoices. While this is a riskier option, it does mean paying lower fees to the factoring company. 

• Non-recourse factoring: In this type of contract, the factoring company assumes the risk. You will likely pay higher fees, but the factoring company will absorb the loss if any customers don’t pay their invoices. 

Bad Credit Business Financing That Works for You

At Midwest Business Funding, we are dedicated to providing tailored invoice factoring solutions to meet the unique needs of each business. As industry leaders, we are committed to providing superior customer service and aim to create lasting partnerships that benefit everyone involved.  

Let’s work together to find a solution that works for you! Contact us today at +13176063595 or visit our website and fill out our web form to learn more about our comprehensive factoring services.