Given the current state of the economy, many small business owners are searching for new and innovative ways to enhance their cash flow. Before, they usually thought about going to a bank first, however, unfortunately the reality is that with today’s tight credit market, this strategy isn’t very successful.

It is very difficult for a new small business to even get approved for a loan. Although Bank of America has recently extended over $12 billion to small businesses, the bank will only qualify your business if it makes a revenue that reaches $20 million. In this sense, many small business would not qualify for this.

Anyone would rarely think about invoice factoring, or accounts receivable funding, when his/her business would need cash flow or a working capital for the business. Why is this so? The answer is simple: most people immediately think of a bank when they seek financial aid.

Accounts receivable factoring isn’t a typical “bank product” so this alternative is confusing for several business owners.

A business owner seeking working capital typically looks for a specific amount of money - otherwise known as a line of credit or credit limit. Traditional funding strategies dictate limits on funds available based on the pledged collateral assets.

Getting small business loans is beneficial for one who basically needs a lump sum of money immediately. It would be very fortunate of you if you can immediately obtain one. These days, on the other hand, this is a very challenging feat. This is where small business factoring can help you - by giving you steady and reliable cash flow. And the cost of selling your invoices or factoring them in exchange for an advance of the funds? just a small percentage of the invoice value.

One of the advantages of invoice factoring over standard business loans is the fact that it’s easy for you to gain access to funds. In business loans, you need to wait days before the amount will be reflected in your bank account. A factoring company provides funds within twenty-four hours of invoices being issued. In a small business loan, however, you can only borrow a fixed amount and if you go beyond that limit, then you’re obliged to talk to your lender once again.

Small businesses who borrow against invoices through factoring know that it is a more flexible solution because as their sales grow, their business grows. Borrowing against your invoices using factoring offers a flexible approach, and in turn, you can concentrate on generating more sales instead of chasing payments.

Now, if you’ve considered this method over other financial alternatives (like business loans, overdrafts), know that first and foremost, the factor company will take a minimal percentage out of its value. Additional fees may be incurred if you choose to outsource credit management. It’s still significant to take out credit protection - even if the factor company will fund your invoices, you will still be liable for bad debts should the payees not pay.

Borrowing the funds to finance your business through its different growth stages as well as the economic forces can be achieved in a lot of manners, but invoice factoring is becoming more popular, because it’s an easy way to swiftly measure the return on investment (ROI). Also, there are no loans to pay back.

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