The Top 5 Invoice Factoring Myths Debunked

There is so much information on business finance, particularly invoice factoring available that it’s hard to separate fact from fiction.

For many small enterprises, invoice factoring has emerged as a valuable financial tool to bridge the gap between completed work and payment receipt. However, like any financial solution, invoice factoring has its fair share of myths that can cloud a business owners’ understanding of its benefits. If you’d like to learn more about the subject from industry leaders, this article dissects the issue and provides all the facts you need to leverage this invaluable tool.

Myth #1: Invoice Factoring is only an option for businesses in distress.

While invoice factoring is a viable option for businesses in distress, it is an option that can be used by any business making strategic moves to improve its financial situation. Invoice factoring is a strategic financial choice, not a last resort. Express Business Funding provides an efficient financial solution that keeps you and your business secure. Instead of waiting for your clients to pay you after a lengthy cycle, you sell the outstanding invoices to a factor and voila – cash in hand! Picture it like this: You have an outstanding invoice/s, EBF then factors that invoice to allow you to access up to 80% of the value of the invoice early. EBF then pays the remaining 20% (minus fees) upon receipt of payment of the invoice/s. It’s a simple, efficient solution to keep your business on track, but not every business is the same, therefore each factoring deal is structured differently.

“Here at EBF, we understand the struggle of lengthy payment cycles. That’s why we’re here to help you unlock new growth opportunities through our invoice factoring strategies that allow you to cover operational costs or invest in expansion,” says Gareth Bird, Chief Growth Officer at Express Business Funding.

*Did you know? Over one-fifth of businesses with 1 to 4 employees (20.8%) and 20 to 99 employees (21.8%) reported that their current debt level was greater than it was during the pandemic. With invoice factoring, you won’t be piling on more debt; instead, you can attempt to turn your invoices into cash without additional loans hanging over your head.

Myth #2: Invoice Factoring is Expensive

Not always! While other financing options may make you cautious, it’s always important to do your research to find the financing company that better suits your budget. There’s more to it, though. The cost of invoice factoring isn’t just a number on a bill; it’s an investment in the lifeblood of your business – capital.  

Some benefits include early settlement discounts, the ability to invest in new projects and eliminating the need for your business to expose itself to situations like indebtedness.

Suppliers love prompt payments; Leveraging invoice factoring allows you to potentially gain a benefit in the form of early payment discount.

Express Business Funding offers a cost-effective lifeline for small to medium size businesses, ensuring you can manage your finances effectively by purchasing your outstanding accounts receivable, providing you with a large percentage of the outstanding amount upfront. Once your customer has settled their account, EBF pays the remaining balance to you, less fees.

Myth #3: Invoice Factoring Hurts Customer Relationships

A lot of business owners think that invoice factoring is harmful to customer relationships. the debt retrieval process can be aggressive when you partner with a predatory factor, but diligent research allows you to mitigate this risk.

Express Business Funding understands the paramount importance of maintaining strong client relationships. The client can elect to conduct debt retrieval with EBF. The debt is (and should) constantly be retrieved with relationship continuity in mind.

Clients are informed about the factoring process and assured that it’s a smart financial move, nothing more. No raised eyebrows, no awkward silences – just a smooth-sailing partnership.

Myth #4: Only Companies with Perfect Credit Can Use Invoice Factoring

Businesses may face credit hiccups, which doesn’t mean they should miss out on the financial benefits of invoice factoring. This is what sets Express Business Funding apart and should also put your mind at ease: Your business won’t be judged solely on its credit history but instead evaluated on the reliability of your client’s customers in settling their invoices promptly, as well as other factors such as your business size. This innovative perspective levels the playing field, making invoice factoring an accessible and viable lifeline for companies facing credit challenges, new businesses, and businesses with slow invoice turnover.

“EBF is here to open doors and provide the financing you need to survive and thrive in a competitive business landscape,” says Bird.

Myth #5: Invoice Factoring is a Complicated and Time-Consuming Process

Simplicity and speed can coexist in the financial world. It all boils down to how much research you put into the companies you’re looking to apply to for financing.

Express Business Funding, for example, has streamlined the application process and established efficient approval timelines, allowing businesses to access the funds in days, not weeks or months – without drowning in paperwork or red tape. We are hands-on throughout this process to assist in mitigating delays and ensure that you receive your much-needed capital expeditiously.

For businesses needing timely support, looking to invoice factoring will allow you to seize unexpected opportunities, cover urgent operational costs and even gain financial peace of mind.

Invoice factoring is a powerful financial tool that can empower businesses to thrive and grow. Express Business Funding dispels the myths surrounding invoice factoring, offering a transparent and efficient solution for businesses seeking to enhance their cash flow. By debunking these misconceptions, small enterprises can make informed decisions that align with their financial goals and set the stage for sustained success.

If you’re a business owner needing invoice factoring, contact us to get in touch with one of our members and we’ll provide you with the personalized assistance to get your business back on track with our financial guidance.