As a business owner, there are many lines of credit available to you that are specially made for business. One underutilized financial asset is accounts receivable financing, also known as factoring. Factoring is funding structured differently than a loan. The finance company instead buys your outstanding invoices at a discounted rate. This puts money back into your business faster than chasing down your clients’ unpaid invoices. Here are some key ways your business can benefit from factoring.

Expand Your Business, Not Your Debt

When you are gaining clients or receiving large product orders faster than your company can keep up, there’s a way to keep your business running without borrowing money. Factoring allows you to use the money you have already earned from your clients even if the invoice has a one or even three-month lag. Because factoring means you get paid faster, you can expand your business faster. For example, say you have a screen-printing business. You just received an order double the size of your regular workload. The client will be billed for more than enough to justify hiring extra help to complete the job. By utilizing factoring, you can get an advance on the funds to be sure your employees are all paid on time. You can confidently acquire more personnel or production equipment through accounts receivable financing instead of relying on traditional debt like small business loans.

Outsource and Conquer

Another way factoring can benefit your business is by saving you time. By outsourcing your accounts receivable to a factoring company, you don’t have to spend time chasing down past-due invoices. Factoring allows you to receive an advance on what your clients already owe you. For a fee, you get the funds you need to run your business much sooner than relying on your invoicing. This also frees up your time to improve your business without worrying if your clients will pay on time.

No Credit? No Problem

Accounts receivable financing can also be valuable to start-up businesses or those with little credit history. Factoring provides funding by using pending invoices as collateral. This means that instead of looking at your business’s credit, your client’s credit history is considered. If the client you are invoicing has a good history of paying their bills on time, the factoring provider will most likely approve your financing since there is a good chance they will get their money back. Factoring helps your business grow and operate smoothly even without a strong credit history.