Cash flow is an essential trait for any successful and thriving business, and invoice factoring is one of the best alternatives for those that would like to remain at the top. New Brunswick is experiencing tremendous growth in online invoice factoring, with many businesses opting to seek the services of these companies. One of the reasons factoring has gained so much popularity in Brunswick is that most businesses facing financial challenges find it more difficult to access traditional financial products from high street banks.
That discussed, what is invoice factoring?
Also commonly referred to as debt factoring or factoring, this is a financial move that allows a business to sell its unpaid invoices to a third party that is a factoring company. The factoring company buys the business’ invoices for an agreed percentage of their total value and in turn collects the invoice payments.
How does factoring in New Brunswick work?
Most companies that offer to factor in New Brunswick pay in two installments. The first installment covers the bulk of the receivables, while the second one gets paid when your clients pay their invoice, less any factoring fee. The steps used for most factoring companies are:
- Submit details of your invoices
Submitting the details of your invoices is the first step. Submission of the same determines if you are qualified for factoring in New Brunswick. The factoring company will assess if they can work with your business, the risks involved, and what they stand to gain after or while working with you. The factoring company in New Brunswick will then give you their quote.
- Reaching the agreement
If you are eligible to receive factoring services from the company, you agree and the factoring company will advance your finances.
- Collection of invoices
After agreeing, the factoring company then commences with the collection of the invoices from your different customers.
- Payment of the remaining balance
Once the factoring company has collected your invoices, they will pay you the remaining balance of what they owe you and subtract their fee.
Why would a company consider factoring?
In a nutshell, companies consider factoring in New Brunswick to speed up their access to financial help. They also do this to speed up incoming cash flow since waiting for invoices to get cleared for payment can sometimes be a lengthy process.
A common issue that most businesses face is that the payment terms for invoices can take up to three months, which would result in problems with the business’ cash flow. The gap is its cash flow at this particular time necessitates the business to seek aid in a bank for business loans or bank overdrafts, although factoring is another alternative that goes a long way in adding value to your business. Factoring in New Brunswick can come in handy even when you do not qualify for a bank loan since they do not focus on your credit history entirely but on your customers.
Who can seek the services of a factoring company in New Brunswick?
Below are some industries and businesses that can consider factoring in New Brunswick:
- Tracking and freight
- Telecom and wireless companies
- Oilfield companies
- Heavy construction industries
- Utility and pipeline industries
- Government contractors
- Technology industries
- Staffing industries
- And other companies
The perks of invoice factoring include:
- Invoice factoring is an efficient and safe way to access cash flow by financing accounts receivables and unpaid invoices.
- It saves you time since you do not have to chase late payments from your customers as the factoring company in New Brunswick does this for you.
- Factoring in New Brunswick allows the company to take over your credit control matters in your business.
- The amounts associated with factoring can easily contract and expand with your sales ledger.
- Factoring in New Brunswick is way affordable than opting to seek the services of a banking institution or equity investors
- These companies are experienced and can advise on ways to improve efficiency regarding finances in your business.
- Factoring companies are professional and, with their reminders to your customers, they help to improve the payment terms, especially on a long term basis.
- With invoice financing, you get offered better cash flow control, especially where there are different terms of credit across your customers and clients.
The disadvantages of factoring
- Factoring in New Brunswick may affect the relationship with your clients, since you have to let them know that you have involved a third party to deal with your invoices.
- In most cases, the costs associated with factoring are much higher compared to getting a bank loan.
- Factoring may inhibit your scope for additional borrowing.
- Your business loses control over accounts’ sole responsibility since you have included a third party.