Because factoring, as a form of commercial finance, is structured as a purchase and sale method of finance rather than a typical loan, factoring offers some tremendous advantages and options for small business owners. For example, factors do not require personal guarantees from their clients and additionally do not require a lengthy business credit history when establishing a financing facility. This makes factoring perfect for young companies and even startups.
With factoring, you can receive advances against your invoices to use to make payroll, pay suppliers, purchase inventory, and expand your business. Factoring can also allow you to offer the credit limits that many larger customers demand, without having to worry about interruptions to your company’s cash flow. Additionally, factoring can allow you to take advantage of trade discounts, as well as meet trade obligations and other expenses.