When considering using invoice factoring for your capital needs remember it should only be used as a bridge to ongoing institutional (bank) financing. By factoring your invoices to get through a growth period you can effectively maneuver through the tough cash squeeze stage as the business gains momentum. Access to capital is key. Going to the bank too early can be hazardous if you don’t qualify for the proper financing facility which could leave you high and dry.
Accessing capital by factoring your commercial 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 only 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.