A growing number of businesses in Tampa, Florida, choose invoice factoring to augment their cash flow needs. The answer is simple—invoice factoring offers quick and easy cash solutions in as fast as 24 hours.
Cash flow is the lifeblood of all businesses. Without cash flow, a company cannot possibly operate. Cash will always be king from the early stages of a business until it reaches its peak.
With that said, let’s explore why factoring in Tampa is the key to cash flow and how it helps businesses in Tampa, FL, and throughout the United States.
How Invoice Factoring Works
Invoice factoring in Tampa works when business owners sell their outstanding invoices to factoring companies in Florida, often known as “factors,” in turn for cash.
In invoice factoring, you sell unpaid invoices for a little less than the face value of the accounts receivable. On average, about 70%-90% of the invoice is given to you as an advance. But at Factoring Express, we offer clients like you as much as 95% of the face amount on your A/R.
This new way of factoring companies for small businesses by converting invoices into cash allows you to keep flexible payment terms for your clients. You can still offer the usual 30-60-90-day period without suffering from the long wait.
Cash Flow Benefits of Invoice Financing
A business start-up can face many challenges in its cash flows, which could be minor or significant business issues that might need funding. You should know that obtaining such funding is not limited to a loan but also other financing alternatives, like factoring.
1. Easy Small Business Qualifications
We said it before, and we’ll say it again – small businesses can easily qualify for factoring since you won’t need any assets tied to a factoring deal. You don’t have to worry about collaterals as you don’t need one.
2. Quick Cash Solutions
Bid the long wait goodbye! Immediate funding is no longer a problem. With factoring, your cash funds can be available as fast as 24 hours. Businesses don’t need to wait long weeks just to get rejected. It only takes a few steps to get your cash quickly.
3. Avoid Incurring Long-Term Liabilities
A loan is ultimately a long-term liability that needs to be paid on a repayment schedule. If you face cash flow problems, paying on time might become an issue. Thus, it can incur possible penalties.
4. Help Work with Client Relationships
Choosing the right factor plays a huge role in maintaining your relationships with your clients. It’s important to partner with someone who understands your needs as well as your clients.
5. Easy Collection of Payment
Once an invoice has been factored, the factoring company assumes the risk and responsibility of collections. This lets you focus on your business instead of stressing about payment reminders. It would be best to communicate this to your clients to avoid confusion when they pay the invoice.
6. Enhanced Cash Flow
Instead of waiting 30-90 days for invoices to be paid, you can now take advantage of time-sensitive financial decisions in your business.
7. Improved Working Capital
This measures your financial health and operational efficiency. This liquidity boost from factoring allows your business to meet its short-term obligations and pursue opportunities.
8. Reduced Financial Stress
Any financial stress can harm your business and yourself as the owner. When you factor in, you lessen the financial strains you are facing and reduce the uncertainty and anxiety of having too many pending receivables.
9. Increased Growth Opportunities
You don’t have to miss out on any opportunity that comes your way. Sustainable growth is a cornerstone of your business’s success. Factoring gives you the necessary resources and funds to seize growth opportunities and accelerate your business’s trajectory. This way, you can fuel innovation and scale your business, empowering your stand in your industry.
Application Process of Factoring vs Traditional Loans
There is an enormous difference between the process of factoring and applying for traditional bank loans. It’s not hard to see why more and more businesses are opting for loan alternatives like invoice factoring.
Application Difficulty
Banks and other financial institutions require a hefty load of paperwork before assessing your application. On top of that, some of these requirements will need to come from a licensed CPA to prove your eligibility and capability of repaying a loan.
The best factoring companies require much less paperwork than banks. Here, you don’t have to prove your capability for repayment as it isn’t needed—unless for specific reasons like recourse terms—it’s solely your clients’ credit scores that will matter.
Eligibility to Apply
The paperwork for a Tampa invoice factoring application is far less complicated than the ones in traditional loans. Once your invoices are sent and outstanding, you may be able to apply for a conversion already. Unlike in bank loans, you will need at least a credit score of 700 to be considered.
Clientele Credit History
As we mentioned, the best invoice factoring companies will look into your client’s credit history. Factoring finance companies tend to favor invoices with good-paying clients on the list. If you have this already, the next step is to prove you’ve delivered the goods and services.
What is Not Accepted in Applying
In banks, a bad credit history will ultimately get your loan applications denied – something that Tampa factoring companies can help fix. Since you have to prove delivery, firms do not accept purchase orders and proposed invoices. Only the actual outstanding invoices can be factored into.
Difference between Loans and Factoring
Let’s discuss further the main differences between a loan and factoring agreements. What we list below are the main categories you should consider:
Approval Process
Bank loans take weeks to get approved. After passing a load of paperwork and requirements, the assessment and credit check take a longer period of time compared to factoring. When you factor invoices, it’s like an instant cash conversion with a factoring company in Tampa, like Factoring Express, offering cash in as fast as 24 hours.
Collateral
Qualification requirements are straightforward with top-rated factoring companies. You don’t need to tie up an asset as collateral, making it the perfect choice for starting businesses. With a loan, banks usually look at what you can offer as collateral to secure against a debt you’re making. This is to ensure that, in any case, you default, they can still recover part of the loan you made by acquiring your tied asset.
Limits and Caps
Again, credit history does not determine your cash conversion possibilities with factoring companies. You will often decide how much money you want to get from your outstanding accounts receivable. The flexibility of accounts receivable factoring companies is limitless – there are no caps or limits, and you can pick specific invoices you want to sell.
The funding limit for traditional loans is based on the assessment a bank or financial institution will do after you submit your application, taking into consideration your credit score, your business’s financial status, and the collateral you are willing to pledge.
Interest and Fees
A loan is typically an interest-bearing debt that needs to be repaid. Depending on the financial institution providing it, there may be minimal loan processing fees apart from the interest rate in the repayment scheme provided to you upon loan assessment.
A factoring company account, on the other hand, evaluates your A/R to sell and advances your cash. Factoring fees and discount rates are charged upfront, and whatever is left will be paid to you once your client pays the outstanding balance of their invoice. Our offers at Factoring Express have no hidden fees for all types of factoring.
Why More Business Owners are Choosing Factoring
Unsurprisingly, more and more businesses are choosing top factoring companies over traditional loans. Given the multitude of benefits factoring companies offer to small and medium-sized enterprises, it is indeed an excellent financing option apart from loans.
Here at Factoring Express, we cater to more than one industry. We help businesses in transportation, health care, staffing, merchandising, government vendors, and contractors with their unique financial needs.
We understand the struggles a business faces every day. That is why we have a 24/7 team that can extend you the help you need as quickly as possible.
For new clients like you, we offer a one-week FREE trial with no obligation and no long-term contracts. So hurry! Get the cash you need today by reaching out to us. Our staff is happy to answer any questions you have.
