Maybe you have not been a self-employed or freelancer for very long and starting your own business is quite a bit difficult. There are many costs involved, you have to invest and not every invoice is paid on time. That is of course annoying. Still, there is a solution that will allow you to keep your cash flow and not waste your time chasing outstanding invoices. There is such a thing as factoring for self-employed and freelancers. You can read what it entails below.
Factoring for self-employed people
Above we have already sketched the picture of invoices that are not paid or are not paid on time. That is of course very annoying, because you also incur costs. A solution has been devised for this: factoring. What is Factoring? Factoring is a way to have your outstanding invoices paid immediately (within 24 hours). You sell your invoices to a so-called factoring company, as it were. They will pay you all or part of the outstanding amount (the remaining amount will follow when the invoice is paid by the customer) within 24 hours. This way you have your money immediately and you run little or no risk.
Why do you choose factoring as a freelancer?
Factoring can be useful for freelancers as you have a constant cash flow. You may need that. You no longer have to wait and can immediately pay the rent or mortgage and make investments for your company. In addition, factoring self-employed is useful if you need immediate money. With most factoring companies, the risk is not yours. This immediately covers the risk when invoices are not paid or are not paid on time.
Advantages and disadvantages of self-employed factoring
There are several pros and cons to freelance factoring. It is important to see what is more important for you in the list below.
- Often paid up to 100% immediately (within 24 hours);
- The risk is often not yours;
- Freelance debtor management is not your place. You hand it over.
- You often need to be transparent about your banking affairs. Insight into your financial position can be experienced as a disadvantage;
- Resistance among debtors, which can deteriorate the relationship between customer and principal.
Freelance factoring costs
The costs of freelance factoring are very dependent on which company you leave your freelance debtors with. The costs vary between 3 and 6 percent per outstanding invoice. This percentage is deducted from the amount you are paid. Suppose your outstanding invoice is $ 100. A factoring company will arrange the invoice for you and, hypothetically, you will have to pay the company 3 percent. Then you will receive $ 97 from the company.
There are several providers that offer self-employed factoring. Take a good look at which company suits you and what conditions are attached to it. If you leave your details with us for factoring, we will give you a selection of providers that may suit you well. Read the contract carefully, know what any additional costs are and what you are getting into before entering into self-employed factoring.