August 18, 2022

Experts Answer: Is Invoice Factoring Right For Your Business?

There are many benefits of invoice factoring, but that doesn’t necessarily mean it’s right for your business. It’s critical that you understand how the process works, the pros and cons, and the overall impact on your company’s finances.
A woman researching invoice factoring for her business

Experts Answer: Is Invoice Factoring Right For Your Business?

There are many benefits of invoice factoring, but that doesn’t necessarily mean it’s right for your business. It’s critical that you understand how the process works and the overall impact on your company’s finances.

Davinder Singh, Executive VP of Business Development at REV Capital, shared his thoughts on the finer details of business factoring and how it can help different industries. Keep reading for guidance and advice, as well as expert insight from Singh.

A Brief Overview of How Invoice Factoring Works

In simple terms, invoice factoring allows you to get paid for most of your invoice upfront. When your customer pays the invoice, you then receive the remaining balance minus a small fee. 

Invoice factoring isn’t the same as a loan. You’re not borrowing money, but instead receiving an advance on payments that are due to you. This means no loan application, no interest, and no monthly payments. 

How Invoice Factoring Can Help You

According to Singh, invoice factoring solves a number of common business-related financial problems:

“One of the most critical problems addressed by invoice factoring is consistent cashflow. It’s needed in order for a business to grow, plan for the future, and meet financial obligations. Most lenders look at cashflow over profits to gauge the health of a business.”

Without invoice factoring, you could find yourself waiting for weeks or even months to receive payment from your customers. With that, your cashflow begins to suffer forcing you to adjust your business plan to account for it. 

Invoice factoring takes this concern out of the equation. It provides access to money that’s owed to you before it’s actually paid by your customer. Additionally, since it doesn’t require an in-depth credit analysis, most companies can get started right away. 

Types of Businesses Invoice Factoring Can Benefit

While almost every type of business can benefit from invoice factoring, some rely more heavily on this source of cashflow than others. The most common industries include:

A lineup of trucks

When asked if there are businesses that don’t benefit from invoice factoring, Singh shared the following:

“Honestly, I can’t think of any business that wouldn’t benefit by increasing their cashflow. Overall, businesses need cashflow to grow and thrive, so cashflow is a critical part of any business growth plan/program.”

In other words, if your business generates revenue, you should consider invoice factoring. By helping you receive consistent cashflow, it also allows you to take on more jobs, pay your employees and bills on time, and remain flexible through economic ups and downs. 

Criteria Factoring Companies Look For

As excited as you may be about invoice factoring, you should first determine if you’re eligible. Factoring companies take into consideration various factors, such as:

  • Industry
  • Invoice amount
  • Sales volume
  • Business size
  • Creditworthiness

“There are really no limits for a company to factor, as we look at the clients the company has and what industry they operate in,” added Singh. “Based on those criteria we are able to set most companies up with accounts receivable financing. The process is much simpler than trying to obtain a small business loan or a line of credit, and for this reason, most businesses turn to invoice factoring to increase their cashflow.”

Tip: Apply for invoice factoring today on our website to learn more about the process and your eligibility. 

Avoid Invoice Factoring If…

There are virtually no reasons to avoid utilizing invoice factoring. The benefits of this form of financing allow you to receive immediate funding, maintain consistent cashflow, and mitigate financial risk on several fronts. When compared to potential downsides, it’s no contest. Invoice factoring almost always comes out on top. 

Even if you have some reservations about business factoring, experiment with it to gain firsthand experience. This is the best way to understand what it can and can’t do for your business. You may decide on a different option today, but you could change your mind in the future.

Closeup of a handshake

What Should You Look For in a Factoring Company?

Don’t choose just any factoring company. Choose a factoring company with a longstanding reputation for providing a high-quality customer service experience from start to finish. If nothing else, compare companies based on integrity and honesty. The type of company you choose to work with should be a reflection if your own business values.

As the Executive VP of Business Development at REV Capital, Singh knows exactly what to look for in a factoring company:

“From the moment you sign the application to the point of receiving funds, REV Capital and the team believe that the client should have full knowledge of the process, their rate, their terms, and anything else that may be involved in the process. At REV Capital, we are changing the game through transparency, integrity, and honesty. Our goal is to reinvent factoring and set industry standards by setting the bar for high ethical and business standards while providing the best service in the industry.”

Is Invoice Factoring Right For You?

If you’re ready to learn more or get started with invoice factoring, apply online or contact us at 855-489-0310. Either way, you can expect an experienced member of our team to provide you with additional information, answer your questions, and ensure that you’re confident in the decision you’re making.