5 reasons factoring is the best financing option for a small business

January 15, 2022

Money can stretch pretty thin sometimes when you’re running your small business. Whether it’s because you had a slow month or clients aren’t paying up on their invoices, it’s not uncommon for a small business to need some extra capital to get through the month. As the owner of your business, you might be considering taking out a working capital loan or negotiating a new payment plan with another creditor. At BP Financing, we understand this and can help with factoring for small businesses.

We believe that factoring for small businesses is one of the best ways to bridge the gap between needing money and having invoices paid by your clients. If you’re not sure factoring is right for you, we have five reasons below why it is the best financing option for your business.

It doesn’t affect your credit

Taking out a small business loan from a bank or another lender requires seemingly endless amounts of paperwork and a check into your personal credit history. A poor credit history will directly impact your ability to qualify for a loan and determine the interest rate you get. If you do get approved for the loan, it will affect your credit until you eventually get it paid off.

Factoring doesn’t require any checking into your credit, no interest rates, and no long-term debt on your credit history. With factoring, small business owners can get the funding they need when they need it without having to worry about a poor credit score.

Not a loan

Having an outstanding loan can weigh heavily on your mind. You might be worried about the interest rate, how long it will take to pay back, and how much you’ll end up paying in interest during that time. When you get funding with factoring, you’ve already established a short-term deadline for which you’ll repay the financier, which is typically within 30 days, so you have time to collect on your invoices. Rather than paying interest like a loan, you pay only a set fee.

Affordable financing

Between interest rates and early payoff penalties, you could end up paying quite a bit into a small business loan. While you probably got the money you needed at a time when you needed it, you’re going to end up paying more to ensure the lender is making money off your loan. Factoring is a viable short-term financing option that comes with a small fee attached to the money rather. You’ll find that the fee is a much more affordable option than a monthly payment on a small business loan because it’s paid one time rather than stretched over several months or years.

Get your money right away

Getting approved for a loan can take a long time. You can help to expedite the process by going to the lender with all the necessary paperwork, but it can still take weeks or months to reach a final decision. If you need money now, this won’t work. At BP Financing, we understand that you need your money right away. Getting approved with factoring is quick and easy, so you don’t have to worry about missing payments coming due. We make sure you have your money with 24 hours so you can meet your financial obligations without having to wait for someone else to pay you.

Reduces risk

There’s always a certain level of risk when securing financing for your business. Loans carry a considerable amount of risk because you’re probably using the money from the loan right away, then you have either no collateral, or it’s the equipment you need to run your business. Should your income stream slow down again, you could be at risk of defaulting on your loan and losing the equipment. Factoring uses your outstanding invoices as collateral, so you can be confident that you have the money coming in that will pay off your financing.

Reach out to learn more

You can learn more about factoring for small businesses by getting in touch with our team at BP Financing. We want to help you get the money you need when you need it. Give us a call at 845-352-3700 or send a message using our contact form to schedule an appointment.

5 reasons factoring is the best financing option for a small business