Invoice Factoring For Small Businesses

Invoice Factoring For Small Businesses

by Curtis Sutherland, VP Accounts Receivable

As a small-business owner, you’ve worked hard to build your enterprise and get to a point where you have strong relationships with your customers and can rely on them to pay their invoices. Sometimes, however, that’s not enough to keep your business operating at a high level. Even when you know your clients will pay their invoices following whatever delay is common in your industry, the time spent dealing with two negatives – products or services already provided and no payment – can hamstring your operations.

How can you address the issue of cash flow peaks and valleys? How can you make sure your small business always has enough funds on hand to continue operations and address a wide variety of opportunities and challenges? Invoice factoring is the answer.

Invoice factoring: a smart choice for small-business owners

Many small-business owners consider some form of loan or line of credit when they face a lack of readily available funds due to unpaid invoices. While there are plenty of options out there, it can be difficult to secure many of them as a small-business owner. You may not have the type of collateral some lenders look for, for example. You may also not want a lump-sum loan that could lead to significant costs in terms of interest payments.

Invoice factoring addresses some of the most common issues related to securing a line of credit by using existing unpaid invoices as collateral for your line of credit. You don’t have to put vital machinery or the building in which your business operates on the line – you simply draw on money already owed to you. Invoice factoring gives you the funding your business needs now by leveraging the money that’s already in the accounts receivable process.

What does the invoice factoring process look like?

The simple nature of invoice factoring makes it easy to both understand and use. You gather the invoices you want to use, then give them to your financial institution in exchange for a line of credit. Your lender then takes on the collections role. In most arrangements, you receive a majority of the funding up front, with a supplemental amount provided by your lender once they receive payment on the invoices. You can continue to fund your business by providing additional invoices, meaning you can maintain stable access to readily available funds as long as you have new transactions with clients coming in.

How does invoice factoring help my business?

The basics of invoice factoring should be clear, but you may still be wondering why it’s so useful for small-business owners. With a readily available line of credit based on existing, unpaid invoices, you have the financial flexibility to do everything from take advantage of a limited-time opportunity to correct an unforeseeable emergency that could otherwise derail your business. You can also address more regular needs that are just as critical, such as paying your employees and purchasing more raw materials to keep your production line running. Because invoice factoring provides funding that can be used for nearly any business purpose, you have the freedom to spend the money you receive on anything that might be necessary or beneficial for your operations.

Of course, finding the right financial institution to partner with is vital for a positive experience with invoice factoring. TAB Bank is here to provide personalized attention, easy access to an online portal to manage your line of credit and a dedicated relationship manager along with the funding itself. To learn more, reach out to TAB Bank today!



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About the Author

Curtis Sutherland

Curtis is an accomplished banking executive with over 15 years of commercial banking experience with a focus in structured finance. Areas of expertise include factoring, asset based lending, equipment loans, inventory lending, commercial treasury services, and the uniform commercial code (UCC). History of excelling in a fast-paced growth environment, managing organization change, and attaining superior customer service levels. Ability to leverage technology and human capital to facilitate business excellence and competitive advantage. Experienced in cultivating and maintaining key relationships with clients, executives, shareholders, and strategic partners.

Curtis has gained invaluable experience while successfully managing a rapidly expanding portfolio through organic growth and company acquisitions. Offer comprehensive credit discipline and business acumen relating to portfolio management during expansionary/contracting economic cycles. Demonstrated ability to recognize competitive opportunities to capitalize on current market conditions. Exceptional sales and marketing skills, along with a proven ability to learn new products, theories, strategies, and tactics – all while retaining the foresight to stay abreast of rapid changes in technology, evolving markets, and industry trends. Extremely well networked with industry professionals, trade organizations, brokers, attorneys, and potential clients. Proven credit discipline and risk mitigation strategies with the lowest loss ratio in the factoring industry.

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