One of the best kept secrets of business financing is invoice factoring. With all the commercial financing available the concept of factoring accounts receivables for operational cash flow is still not widely considered. The mechanics of the transaction are very easy to describe, simple to set up, flexible to use, and becomes critical to the many companies who utilize its benefits.
While there are so many types of financing available; bank term loans, revolving lines of credit, loans with warrants, asset based loans, direct public offerings, mezzanine financing, private placements, all sorts of equity participation, a company looking for outside capital has to be aware of, and have some basic understanding of the pros and cons of all forms of financing before choosing one method.
Be advised, factoring is a tool that is perfect only for certain situations. Capital intensive requirements like labor costs and product purchases are ideal for growing companies seeking to use the factoring model. Businesses with healthy profit margins and strong creditworthy customers will work well with a factoring company.