If you’re eager to grow your business but aren’t sure how, you need to consider invoice factoring as a sure bet.
Factoring is very simple: You sell your business’s unpaid invoices to a factor. The factor advances you between 80% – 90% of their face value upfront, and when the invoice is paid, they refund you the balance, minus a nominal fee.
But factoring is so much more than just a cash advance on your invoices. It’s a strategic sales tool for growing your business. Understanding the benefits of invoice factoring could be the key to unlocking your business’s potential and overcoming common financial hurdles.
1. You Can Offer Something Your Competitors Can’t: Extended Payment Terms.
Let’s say you’re bidding on a project with another vendor or supplier who has comparable products, services, costs and positive reputation as you do. The only major difference between you and your competitor is that you work with a factoring company and your competitor doesn’t.
So how does that make you more appealing in the bid? It’s simple. Your competitor may only be able to offer 30-day payment terms on the sales and services provided. This means your potential customer would have to pay their invoices a month after they are delivered.
You, on the other hand — because you’re a strategic thinker and made the clever decision to work with a trusted factor like ei Funding, now have the freedom to offer 60-day payment terms to your prospective client. How? Because you’ll be able to factor the invoices generated for the services provided for your customers, you’ll get paid upfront from your factor — allowing you to get the money you need to keep growing while your new client has the flexibility to pay for the invoices provided by you in twice the time as your competitor. Since cash is king, and so is cash flow management — you’ve now created the so sought after and famous “win-win situation” for your client by using factoring as a strategic sales tool for providing extended payment terms.
You win because:
You’re getting paid upfront, by your trusted factor, and you use those funds for the continued growth of your operations
You win the bid because you are the most appealing supplier, offering more competitive payment terms to your new customer through the use of factoring
Your client wins because:
They can have additional time to pay their invoices
They can use their cash for other growth needs right now and pay for your services over a longer period of time than your competitor is offering
At ei Funding, we are constantly offering strategic sales tools like this to support our customers’ growth in creative and exciting ways.
2. You Get Cash Quickly to Fund Your New Projects.
You finally get awarded a brand-new project you’ve been dying to acquire for some time (woo hoo!). But once you’ve done all this hard work and now it’s officially on your plate to work on, then comes the next question: How do I fund it?
Upfront, you’ll need to spend a bunch of money right away for things like:
Traveling/transporting products or teams as part of new sales to your customer
And though you’ll be billing your customer on a weekly basis for payroll and other expenses associated with your product/service, the soonest you’re going to get paid is in 30 days (at best). So where will the money come from to fund this new project?
That’s where factoring steps in. If you’re working with a factor like ei Funding, you won’t have to worry about it. Rather than having to spend your current cash on hand to fund this new project, you’ve made the smart choice to factor your invoices, and as a result, you’ll receive your cash up front for all the products and services provided as part of this new project.
One of the benefits of factoring is that you’ll submit your invoices and factor them on a weekly basis, providing you with the cash flow you need to maintain all the resources (human, equipment, and other) necessary to deliver your project on time and on budget. That’s how factoring helps turn a new project into a breakaway success for you and your team.
3. You Can Grow Your Business More Aggressively Because Cash Flow Isn’t a Concern.
Going back to our previous example of the brand-new project you’ve been awarded: your expenses don’t have to be for just the necessities. Sure, you’ll want to have cash for hiring new employees, buying additional inventory or raw materials, or expanding your reach in the market. But if you’re ready for rapid growth — why stop there?
With invoice factoring with ei Funding, you can use your invoices to do things beyond the basics, such as:
Hire expert personnel (specialists in their field)
Buy new media or marketing services
Research ways to expand your services to new areas in the market
Log added development hours for ad hoc items as needed
As you can see, in addition to being a fundamental tool for successful cash-flow management, factoring is also a clever, strategic sales tool to help you grow your business. It allows you to take on some new financial responsibilities you weren’t able to previously, in order to grow more rapidly and in a more sustainable fashion than you could before you were using factoring in your business. See how smart you are?
When you sit down at the negotiating table, you’ll see how factoring adds up in your favor. Factoring with a trusted partner like ei Funding, gives you the confidence to make winning decisions on how to grow your business because you have the peace of mind knowing you can factor your receivables without the conflicting feeling of: “How am I going to pay for all this?” Factoring does all the work for you.
Ernane Iung is a seasoned C-suite executive with a 28-year dynamic career across four continents, including two decades in São Paulo, Brazil, where he held key roles with renowned multinationals such as GE, Whirlpool, Philips and Oster.