
Retainer Fee: Everything You Need to Know About
Get expert tips on setting retainer fees that are fair and reasonable.
TABLE OF CONTENT
There are certain standards that every company should adhere to in any industry. For example, if most of your competitors give customers a 90-day payment deadline, it’s not profitable for you to offer more “stingy” terms. But what about freelancers, for whom such a gap between payments can be harmful? To avoid downtime, you can resort to small business invoice factoring. It’s a handy tool with which you enhance your money flow. SaldoInvoice explains how works factoring services for small business and what its pros and cons are.
Here is the invoice factoring meaning in simple terms. It implies the transfer of bills to be paid by clients to a third party. In exchange, you get the opportunity to receive most of the amount that a debtor should deposit into your account in a short time. In fact, you get access to factoring business loans, although this money is not a traditional loan from a technical point of view.
Depending on the conditions of a particular service provider, invoice factoring rates and interests may differ. As a rule, the sum you get on hand varies from 70% to 90%. Fees may also vary and range from 1% to 5% monthly. You can receive the agreed amount from a factoring agency within two days instead of waiting for payment from a client for several weeks or months.In case your business is in dire need of money, you could apply to a bank for a traditional loan. However, you will most likely be required to leave a deposit.
Moreover, it takes quite a long time to verify your company and review your application.
In the case of invoice factoring, no credit check is needed. The basis for the funds’ provision is the availability of correctly completed bills. Therefore, use an invoice template Google Doc, Sheet, PDF, Excel, or Word formats not to miss important information.
This tool works quite simply:
Even with this approach, there is still the possibility that a client will not pay on time. Factoring agencies protect themselves from such risks and charge higher fees or require payment from you.
For small businesses, invoice factoring offers many significant benefits:
Along with the listed pros, you, as a small business owner, should be aware of the contras this financial instrument has:
Advantages | Disadvantages |
---|---|
Immediate | Can be expensive |
Speedy | Reputation may suffer |
Quick access to cash flow | Problems if the customer does not pay |
Does not affect debt-to-equity ratio | Can make client relationships more difficult |
Before using this tool, you should consider all factoring pros and cons. The benefits of invoice factoring for small businesses are huge, but the downsides can negatively impact their operations.
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