Please ensure Javascript is enabled for purposes of website accessibility Using Factoring to Eliminate Debt and Improve Credit Ratings for Your Business

Using Factoring to Eliminate Debt and Improve Credit Ratings for Your Business

By February 22, 2022April 26th, 2022Business, Factoring

Almost every business in the United States is suffering from unwanted debt from loans and lines of credit. The pandemic and ensuing economic uncertainty have forced businesses in every industry to rack up credit card debt or impact their credit ratings through various types of loans. As the Federal Reserve tapers off its asset purchases, financial relief and stimuli for business are going to draw to a close. Looming inflation will mean there will be interest rate hikes on loans moving forward, and traditional lenders will be raising the requirements on potential business borrowers. This leaves businesses in the awkward position of having to repay loans rapidly to avoid increased interest rates, improve their credit ratings, and find a way to build up capital reserves without taking on additional debt. Fortunately, factoring can help solve all three issues simultaneously.

Eliminating Debt Starts with Improved Cash Flow

Working capital is the life-blood of every business. In fact, most businesses turn to debt-based loans and lines of credit when there is a shortage of working capital. The truth is that most businesses have capital tied up in unpaid receivables. Sales can be through the roof, but when businesses have to wait on payment schedules of 30, 60, or 90 days, they have to put plans and purchases on the back burner. In more dire situations, the outstanding invoices mean payroll isn’t covered. To resolve this, many businesses take out loans, which impact credit ratings, and place debt on the books. For businesses to break the loan cycle and stop taking on debt, they need to find a way to improve cash flow so there is more parity between sales and payments from customers. Factoring from Single Point Capital achieves this by turning unpaid invoices into cash. We make funds available within a single day from the point we receive invoices from our clients. The improved cash flow allows businesses to enjoy revenue almost as soon as sales are made and invoices are generated. This gives businesses the ability to build up capital to quickly pay down existing debt, and to amass the finances necessary to cover payroll and overhead, make large purchases, and take advantage of growth opportunities.

Improving Credit Ratings for Your Business

Unlike loans and lines of credit, factoring carries no debt. The entire factoring process is an exchange of unpaid receivables for cash. Businesses do not have to put collateral on the line, no debt is placed on the books, and credit ratings are not impacted. For businesses with existing debt, factoring preserves credit ratings, so they can pay down the balances on their loans. As they continue to use factoring to build up working capital instead of taking out loans, they will be able to repair and improve their credit ratings. For new and small businesses that may not have the financials to qualify for larger financing, or to act on big opportunities, factoring can reduce or eliminate the need for debt-based loans. This allows startups and other small businesses to build up their credit scores so they can qualify for financing, better deals from suppliers, and anything else that requires credit scores above 660.

Building Capital Reserves with Factoring

Factoring accelerates cash flow to businesses of all types. Attorneys, medical practices, trucking companies, contractors, staffing agencies, and more use factoring services to improve cash flow and prevent invoices from aging out to collections. The accelerated revenue allows businesses to build up capital reserves. The best part is that, unlike a debt-based loan, the financing does not have a single purpose, mainly because the capital belongs to your business and not the bank! That means you can use factoring to build up reserves for growth, equipment, hiring staff, marketing, or simply putting it in your account for a rainy day.

Put Your Business on the Right Track with Factoring

Factoring from Single Point Capital is easy to set up, and you can start factoring invoices immediately after approval. We provide one-on-one support, so your account manager can answer any questions and help you reach your goals. We also provide exclusive tools to our clients, so you can track payments, run credit checks on your customers, and much more. To learn more, contact the team at single point capital, and break away from debt-based financing.

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