If you are considering using invoice factoring for your ongoing operational capital needs remember it should only be used as a temporary bridge to get to institutional (bank) financing. By factoring your accounts receivable to get through a intense growth period you can effectively maneuver through the tough cash squeeze stage as the business gains momentum. Access to capital is key to growing a successful business. By securing bank financing too early in your growth, you may not qualify for the proper level of financing which could potentially leave your business high and dry later.
Accessing capital by factoring your invoices is a valuable solution until you get enough critical mass to qualify for the size of loan to bring in stability. But factoring should be considered as a strategy to get to the next level, not the end all be all of your financing needs. Factoring is a necessary step that brings credibility to your operation by showing that you have the required resources and capabilities to deal with commercial financing.