I came across a blog for aromatherapy providers with a post about the type of factoring called ‘invoice discounting.’ The gentleman who wrote it is from the UK – but it sounds as though they do things very similarly over there.
Anyway, a few things caught my eye and I wanted to go over them:
“Invoice discounting …. can dramatically improve your cash flow by releasing money as soon as you have completed an order and raised an invoice rather than having to wait for your customer to pay. This makes them ideal for funding growth.”
If this is “ideal for funding growth” because money is released as soon as you have completed an order – then credit card factoring must be “superideal” – because you don’t have to wait for that order. We advance cash to businesses based on their PAST credit card sales.
“The amount you can borrow grows in line with sales and it is often possible for you to repay bank facilities and release previously pledged security.”
This is also true with the type of credit card factoring / business cash advance factoring that we do at Fast Up Front; we do have limit on the amount you can borrow, though: $250,000.
Some points that Mr. Courtney did not bring up include: paperwork, time it takes to get approved, and the involvement of your clients and customers with your creditors. These are all issues you may want to research before going the route of invoice factoring. I know that in credit card factoring, we NEVER contact your clients, we provide approval within 24 hours, and there is minimal paperwork. I believe that these are major issues which makes credit card factoring much more attractive to our customers.
To read the article referenced above: Post on Invoice Factoring