Why Has Invoice Factoring Increased in Popularity?

invoice-factoring-positive-business-reputation-PMF-Bancorp

Invoice factoring has seen a rise in the number of companies taking advantage of this kind of financial aid in the past few years. There are many benefits to using invoice factoring which has seen the practice become more widespread, though not every business finds it as useful depending on its working process.

The changing financial landscape has seen many alternative methods increase in popularity during the recession, though as we exit this period many continue to be used. There are various reasons for the recent boom in companies using invoice factoring.

More Cautious Banks

Many businesses have found it harder to secure traditional bank loans for starting or growing their company as banks themselves have been put under pressure. This has led businesses to seek financial help elsewhere and use invoice factoring from other companies.

It is viewed as a cheaper and more accessible method than taking on a bank loan, although some banks do offer invoice factoring services as well. Even though banks are now recovering and more willing to lend again, many businesses have already benefited from invoice factoring and see no reason to change their ways.

Increase in New Businesses

Despite the financial crisis there has been a huge increase in the number of start-ups arriving on the scene. Many of these will have been formed with enough starting capital but in order to cover the on-going cash flow demands whilst growing their business, receiving payment promptly is vital.

Invoice factoring ensures this security by providing the money your customer owes in advance, so you have access to such funds in good time to invest further in your company. This is especially useful for new businesses which may not have the finances to fall back on if a customer doesn’t pay on time or raises a query.

Creates a Smooth Process

Invoice factoring found through Touch Financial creates a smooth process for companies and means they can accurately plan for the future as receiving payment is guaranteed. It works by an invoice being raised with a customer, the invoice being sent to the financial company who then send a pre-arrange percentage of it to the business.

This makes cash available to invest in more equipment, staff or other elements and the lender then collects the payment from the customer. Highly beneficial for small and medium businesses, invoice factoring looks set to continue its popularity as an alternative financing method.

About the author

Mark Holland

Leave a comment: