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Invoice Factoring for Distribution
Distribution businesses know that one of the greatest challenges of growing their business is collecting invoices fast enough to have the capital on hand to expand. Distribution is especially affected by this due to the large-scale nature of most distribution deals. Wholesale operations don’t deal with single products or services, so your distribution business will have large amounts of capital tied up waiting for customers to pay. This can limit the amount of cash you have on hand to hire new help, expand your offerings, acquire more warehouse space, or anything else that your growing business needs. Bank loans and lines of credit establish debt and bills, which only adds to the headaches distribution companies face. The answer to these problems can be found in invoice factoring.
What is Invoice Factoring for Distribution?
Invoice factoring is a financial process whereby a company purchases your outstanding invoices or receivables. Factoring companies will give you an initial funding rate, usually 80-95% of the invoice’s value, and then will pay out the remainder minus a small discount rate once the invoice is paid. The result is fast capital for your business without having to wait for invoice payments to come in.
Benefits of Invoice Factoring for Distribution
There are many benefits for invoice factoring for businesses. The first and most obvious is that it gets you cash quickly. You can use this cash to hire more workers, expand your product offerings, secure more warehouse space, purchase equipment and assets to help your business operate more efficiently, or anything else. With invoice factoring there are no restrictions on how you can use your cash. Moreover, since the cash comes from sold receivables, there’s no debt or bills to worry about.
Another advantage invoice factoring provides for distribution companies is that it doesn’t require a credit check. This can be a boon to companies that are too new to have established credit, or companies that have credit issues in the past. Factoring companies evaluate the credit of your customers, which also means that you’ll have a better idea of who you’re working with.
Finally, invoice factoring lets distribution companies avoid debt. It doesn’t go down as debt on a ledger, so you don’t have to worry about tax implications or bookkeeping hiccups. This saves time on administrative tasks and lets you focus on growing your core business.
As you can see, there are a number of benefits invoice factoring can provide distribution companies. If your distribution company needs liquid capital now, try invoice factoring.