Can you Replace Your Lined of Credit with Factoring?

If improving cash flow and credit are of immediate interest to your small or mid-sized business, factoring can present a viable option that strategically works around traditional ways of establishing credit. Think of the process as a way to quickly alleviate the pressures of pending invoices on your side, receiving funding from a finance company with the understanding that your client will then pay the lending company itself. This method has become a time-tested way of placing leverage back in the hands of the business, reopening options for creativity and development that might not have been available while the company is at the mercy of a heavy bank loan.

A Reliable Alternative to Banks and Chaotic Lending Transactions

Qualification processes for business loans through banks can be tedious and time-consuming, often to disappointing results. The approval process is difficult, especially for businesses that have not yet built a solid history of financial operation. With factoring, the client invoices themselves act as lending collateral, taking some pressure off the company and cutting down on both approval time for bank loans and waiting for clients to fulfill invoices. The stress of waiting on cash flow to continue normal business functions is removed, prioritizing immediate growth over lasting credit-building debt.

Recognizing the Unpredictability of Lines of Credit                      

Beginning the process for establishing lines of bank credit involves a lot of complex moving parts. For small businesses, the immediate needs of the company often do not fit entirely into the typical mold of larger companies taking out business loans. For companies that consider debt a standard part of operations, the slower, more time-reliant process of a major bank loan is a natural solution. Smaller companies that often experience random spikes in fast business development ought to look at alternative methods that work more in line with immediate growth and unpredictable changes. Establishing a line of credit can take a long amount of time that a small business might not have, so factoring can act as a quicker, more as-needed option.

The Values of Business Flexibility

For companies in their early stages or startups looking to secure more reliable and substantial funding, factoring is a valuable option that affords the business the opportunity to build early success without sacrificing cash flow. With the economy being fairly unpredictable for companies that are not necessarily established, choosing this specific alternative to building a line of credit with banks is a way to ease financial pressure off the business and allow for more flexibility for growth with future ventures.


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