Invoice Factoring For Startups

January 6, 2021

A start-up business faces many different challenges. Some of the more immediate challenges are:

  • Hiring and finding good employees
  • Competition
  • Funding

No matter what a start-up decides to do about employees, it will have to meet payroll each and every pay period to keep those employees around. In order to stay ahead of the competition, a start-up will have to invest in marketing, innovation, tech, and product development. In short, a startup founder needs money if it wants to stay in business for the long haul.

The Start-Up Dilemma

A start-up business plan contains the projected costs for getting the company off the ground. Those are the numbers the start-up owner uses to put together requests for initial funding. The owner contacts banks, investors, and other funding entities to get the venture capital needed to get started. For the first few months, the start-up is going great because it has that start-up cash in the bank. When the cash runs out, that is when the problems begin.

The dilemma for any small business is that it will usually run out of initial funding long before it has created the sustained cash flow it needs to stay in business. Part of this dilemma is that the start-up has not been around long enough to establish a credit history that will inspire banks to continue funding operations.

Invoice Factoring Solves The Dilemma

A start-up entrepreneur can either continue to solicit banks for funding, or they can turn to an invoice factoring company to get the cash flow help they need. Invoice factoring companies do not care how long a start-up has been in business. What an invoice factoring company needs is a list of customers with good credit ratings. As long as a start-up has good credit screening policies and a steady flow of invoiced sales, then an invoice factoring company can help.

How Does Invoice Factoring Work?

A factoring company will work directly with a business manager to better understand what the company does and determine what the start-up needs to sustain operations. The best part about factoring is that it is not a loan. It is funding based on the strength of your company’s outstanding receivables. That means that all of that hard work a start-up did to gain customers can be put to good use thanks to a factoring company.

The start-up manager would fill out an invoice factoring account form and the factoring company would approve the application quickly. It only takes a few business days to establish and get a factoring account approved and then get money from creditworthy receivables in hours. An invoice factoring arrangement offers the flexibility and speed that a start-up needs to stay in business and support success.

Invoice Factoring Is One Part Of Your Funding Puzzle

An entrepreneur that utilizes invoice factoring can have the cash flow it needs to meet payroll, pay vendor invoices, and have daily operating cash on hand. This means that the start-up would not have to utilize a bank for operational funding. The benefit here is that the start-up is free to discuss long-term funding needs with its bank while the factoring arrangement stabilizes cash flow.

A good invoice factoring company can also help a start-up to screen new clients and make sure that every new client is generating creditworthy invoices. This helps to streamline the process and enhances the start-up’s cash flow. When you use invoice factoring as part of your start-up funding process, you will have what you need to conduct business on a regular basis.

Make Invoice Factoring Part Of Your Start-Up Business Planning

Invoice factoring answers the questions that pop up for a start-up that is six months old. How do we pay the bills? How do we meet rising demand? How do we grow our business when the banks won’t even talk to us? All of these questions are answered by invoice factoring in a way that sustains cash flow and allows the start-up to meet all of its business planning goals.

If you are an entrepreneur who is planning your start-up, then you need to make invoice factoring part of your planning process. You can establish your invoice factoring account the day your company opens its doors and utilize factoring services to sustain your growth. Invoice factoring can be the difference between getting your start-up past the most difficult growing pains of its initial stages of growth or going out of business.

Make invoice factoring a part of your start-up’s business planning process. While other start-ups are faltering all around you, your start-up will have the cash flow it needs to move closer and closer to becoming an industry leader.

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Copyright by Odyssey Business Credit. 2022 – All rights reserved.