At Midwest Business Funding (MBF), we understand that small and mid-sized businesses sometimes run into financial bumps that need quick and reliable solutions. Invoice factoring is an alternative lending solution that we offer to help businesses overcome these challenges by providing immediate cash flow. In this article, we'll take a closer look at what invoice factoring is, how it works, and the benefits it can provide for businesses.
What is Invoice Factoring?
Invoice factoring, also known as accounts receivable financing, is a type of financing in which a business sells its outstanding invoices to a third-party financing company, known as a factor. We, as the factor, then advance a percentage of the invoice amount to the business, typically around 80-90%, and collect the full invoice amount from the business's customers. Once the invoice has been paid in full, we deduct our fees and return the remaining balance to the business.
How Does Invoice Factoring Work?
The process of invoice factoring is fairly straightforward. Here's a step-by-step guide:
The business sells its outstanding invoices to us as the factor.
We advance a percentage of the invoice amount to the business, typically within 24-48 hours.
We collect the full invoice amount from the business's customers.
Once the invoice has been paid in full, we deduct our fees and return the remaining balance to the business.
It's important to note that invoice factoring is not the same as a loan. Instead of borrowing money, businesses are selling their outstanding invoices to us in exchange for immediate cash flow.
Benefits of Invoice Factoring
There are several benefits that invoice factoring can provide for businesses, including:
Improved Cash Flow: By selling their outstanding invoices, businesses can access immediate cash flow and free up resources to invest in growth opportunities.
Faster Funding: Invoice factoring typically provides faster funding than traditional bank loans, which can take weeks or even months to process.
Accessibility: Invoice factoring does not require businesses to have perfect credit or significant collateral, making it a more accessible option for many businesses.
Outsourcing of Collections: By selling their outstanding invoices to us as the factor, businesses can outsource the task of collecting payments from their customers, freeing up valuable time and resources.
Predictable Cash Flow: Invoice factoring provides businesses with a predictable cash flow stream, allowing them to better manage their finances and plan for future growth.
In conclusion, invoice factoring can be a game-changer for businesses struggling with cash flow issues. At MBF, we offer invoice factoring as one of our financial solutions which are all tailored to the specific needs of our clients. We excel in providing quick funding, expert guidance, and flexibility, control, and transparency for our clients. No long-term contracts, no volume requirements, and no hidden fees, all to ensure that businesses can access the cash they need when they need it without any extra hassle. Our easy application process allows businesses to get approved for funding quickly and efficiently.
With MBF, businesses can trust that they have a reliable partner that will support their growth and success. If you're interested in learning more about our invoice factoring solutions or any of our other alternative lending solutions, please don't hesitate to give us a call at +1-317-408-4364 or fill out our web form to speak with one of our experts. We're here to help businesses invest in the future.