There is a lot of misinformation out there regarding accounts receivable factoring. For new business owners, these myths can be very misleading, and can often engineer decision makers to get locked into debt-based agreements. New Century Financial would like to take some time to dispel some of the myths surrounding accounts receivable factoring to provide business owners with a clearer picture of how the process works and what to expect.
Myth 1: Accounts receivable factoring is only for struggling companies
This is one of the biggest factoring myths we see on a daily basis. Accounts receivable factoring is designed so businesses can access revenue faster and build up capital reserves. Factoring corrects cash flow issues for some businesses and prevents them from occurring for others.
Myth 2: Factoring is risky, or else banks would offer it
Accounts receivable factoring is one of the most stable forms of financing in existence because it is structured around tangible assets (invoices) instead of speculation. The reason factoring isn’t offered by traditional lending channels is because there is no debt involved, so there are no lingering liabilities on the books or profits to be made from ongoing interest spanning months or years.
Myth 3: Invoice factoring involves a lot of red tape
Far from it. Unlike traditional loans which have high requirements and arbitrary board decisions, factoring can be set up very quickly. In most cases, businesses that use factoring services can access funding within 24 hours.
Myth 5: Factoring will damage my business credit ratings
False. As mentioned above, accounts receivable factoring is debt-free. As such, factoring is not based solely on your credit ratings. If anything, the services are more focused around the creditworthiness of your clients.
Myth 6: Invoice factoring will mean I’m getting pennies for my invoices
Many of our clients see as much as 90 percent on the invoices they sell to us. New Century Financial is a national leader in factoring services because of how much we are able to provide to our customers.
Myth 7: Factoring is just a fancy term for debt collection
Factoring is much more than a method for cash flow improvement. Factoring services allow businesses spanning all industries to get fast access to revenue and build up capital reserves for rapid growth. Because of its efficiency and lack of debt, factoring is considered one of the few “recession resistant” financing methods.
To learn more about accounts receivable factoring and how it can benefit your business, contact the experts at New Century Financial today.