July 26, 2021
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Finance Your Business Debt-Free Without Compromising
Access to working capital is crucial to the success and growth of any business. It is very common for businesses to take on debt in order to grow or get through a tough time. However, oftentimes, paying off that debt can prove to be more difficult than whatever struggles required them to take on debt in the first place. For this reason, finding debt-free sources of financing can be very desirable. Typical solutions to debt-free financing include taking on investors. However, this will result not only in loss of ownership of the business, but also a loss of control over how you run the business. Rolling over retirement savings may avoid the pitfalls of taking on investors, but draining your nest egg can put your future in jeopardy. Besides, you’re limited to only what you have in savings. That said, there is a debt-free option that doesn’t force you to give up control of your business or use your own personal finances. With accounts receivable factoring you get all the benefits of being debt-free without any of the drawbacks.
What is Accounts Receivable Factoring?
Accounts receivable factoring is the act of selling your receivables to another business (a factor) at a discount. Since your factor is purchasing your receivables from you, you are not taking on any debt. Doing this gives you access to working capital that you otherwise wouldn’t have access to for at least another 30 days, greatly improving your cash flow. Furthermore, there is no limit to how much financing is available. As your receivables grow, so does the amount of financing available to you. Factoring is also a quick and easy process with funding available in as little as 24 hours.
Who Qualifies for Factoring?
Any business that sells or provides a service to another business (B2B) can qualify for factoring. Best of all, your factor is extending credit to your customers, so all credit decisions are based on your customer’s good credit instead of your own. Plus, factoring isn’t available just to established businesses, but to startups as well.
What Can I Do with the Funds I Receive from Factoring?
Since factoring does not involve taking on debt, there are no restrictions on how you use the funds, and your factor won’t ask you how you are using them. Since your factor isn’t an investor, they also don’t have any ownership stake in your business. With factoring, you are completely free to use the funds and run your business anyway you like.
So, What’s the Catch?
There is no catch, your customers still get the terms they desire, and you benefit with a healthy stream of cash flow. Although factoring is much more than just improved cash flow, you get other benefits as well. With factoring, you are outsourcing your accounts receivable to your factor. That means that they will handle all of the credit checking and collection work for you. Since factoring companies work with many vendors, they are probably already familiar with most of your accounts, and accounts tend to pay factors quicker than they do vendors who don’t factor. Quicker payments of course can lead to faster reorders and even higher credit limits, which translates into more sales for you. Furthermore, with non-recourse factoring, your receivables are fully insured against non-payment.
How Do I Start Factoring?
Getting started is a quick and easy process. Typically, all it takes is a 15-minute phone call to answer any questions you may have, followed by a short application. It isn’t unusual to be factoring your first receivables within 24-48 hours of that initial phone call. If you want to give factoring a try, give DSA Factors a call at 773-248-9000, email us at info@dsafactors.com, or chat with us right here on this web page. We are a family owned business that has been factoring for 35 years. We have the experience necessary to help you grow your business without taking on any debt.
