There are many advantages to being a freelancer – you can set your own hours, choose your clients, and you can wear what you want while working at home. The biggest disadvantage is the familiar struggle of waiting weeks or months to receive payment for work you’ve completed. Invoice factoring for freelancers is a solution.
The Curse of Being a Freelancer
Outside of an unsecured line-of-credit and credit cards, credit approval can be an additional headache as these products aren’t always available to self-employed individuals with few assets. For this reason, an increasing number of freelancers are turning to invoice factoring for financing.
The process is straightforward. It begins when a factoring company, (or “factor”) purchases your invoices at a discount, in exchange for an immediate advance of capital. Within 1-2 days, the factor direct deposits up to 80% of the invoice collectible value in your bank account while holding the remaining balance in reserve after the invoice is paid. When your customer pays the invoice, the factor will remit the balance to you minus a fee which can range from 3 to 5% per month. You can repeat the process as often as needed.
Invoice Factoring for Freelancers: The Solution
While invoice factoring for freelancers isn’t the cheapest option for financing, it excels over most alternative options. Invoice financing also does not require credit approval, and instead relies on the creditworthiness of your clients. For that reason, working with a factor will not increase your debt load. Another unique feature of factoring is the collection of payment; the factoring company collects payment from your clients.
With invoice financing you can confidently take on new clients with long payment terms, and focus on your work without worrying about getting paid. A stabilized cash flow will provide you with far more control of your finances, bringing a better sense of balance to your lifestyle.