considering invoice factoring

Are You Considering Invoice Factoring? Should You Be?

In Financing Resources by Brandt A. HandleyLeave a Comment

Cashflow woes probably aren’t new to your Middle Market organization, no matter how successful you’ve been. As you’ve moved from new business or startup through different growth phases into the Middle Market, you’ve likely experienced numerous instances of not having enough capital or liquid cash on hand as you’d like. Depending on your growth plans, cash flow shortages could continue to be annoying or detrimental to your organization.

If you haven’t heard of or considered invoice factoring, it may be a solution that could assist. However, like all financing options, it isn’t a perfect solution. Certainly, invoice factoring isn’t right for every situation or company. Still, you should be aware of how it works and when it may be beneficial.

What Is Invoice Factoring?

Invoice factoring is a financial solution that could provide some relief to cash flow shortages. A lender or buyer would “buy” your outstanding accounts receivables. Or, in some cases all accounts receivables. Either way, they take over the collection process for you. Your Middle Market organization would be paid a percentage of the total invoices outstanding at the beginning. The purchaser then works through the collection process. When the full invoice amount is collected, they would pay your company the difference. They keep their fees/percentage. You would agree upon the fees and percentages up front and relinquish the collection process.

Why Invoice Factoring May Be For Your Middle Market Organization

Depending on how your AR process is run and what outstanding invoices you may have, invoice factoring can be useful. You’ll both outsource collections and have access to more cash during the process. Invoice factoring can be especially useful if you have many outstanding invoices. Or, if your AR processes are too cost prohibitive or labor intense for your organization.  Instead of you spending time and money attempting to collect, the buyer will be responsible. It can be more successful than typical collection processes. But, you will likely end up accepting less. However, you get to at least collect some vs. nothing.

What To Consider About Invoice Factoring

You’ll be giving up collections to another party. So, they get to make the decision to accept significantly less money in order to collect. You’ll have access to some cash immediately. However, adding in fees associated with invoice factoring as well as accepting less than you are owed could mean you end up collecting significantly less.

Also, your organization will not be working collections, would could be confusing to your customers, could lead them to believe you have turned them over to a collection agency or could lead to them believing you are having cash flow issues, which may in turn, be shared with other customers who you aren’t struggling to collect from.

Depending on your unique situation, these considerations may be more or less detrimental or could be more or less important to your Middle Market organization.

Invoice factoring could be an answer to both your collections and cash flow woes but shouldn’t be entered into without doing some research and reflection first.

So what’s in the Mighty Middle Market for me? — get it right now at

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