Factoring
Accounts Receivable Financing
Pay bills, fund growth, increase sales, meet payroll, maintain a good credit rating, or take advantage of early payment discounts.
What Is Invoice Factoring?
When a business needs cash but doesn’t want to borrow money they can turn to Invoice Factoring. Rather than a bank loan, outstanding invoices are sold to a factoring company.
When your business delivers goods or services to a customer on terms an invoice is created. The average customer may wait 20, 30, or even more days, before paying the invoice.
Rather than wait for payment, your business can receive an immediate advance on the face amount of the invoice from a factoring company.
The factor issues the advance and keeps back a portion in reserve. When the invoice is paid the reserve is released, less the factoring fee. There is no interest or loan fee charged as the process involves the assignment of an invoice rather than the creation of debt.
How it Works
Step 1
Invoice your customer for goods sold or services completed.
Step 2
Submit the invoice to the Factoring Company or Factor.
Step 3
Factor provides an immediate advance on approved customers.
Step 4
Factor receives payment on the invoice directly from your customer.
Step 5
Factor releases the reserve balance to your business less the factoring fee.
How Factoring Helps Your Business
Factoring provides immediate access to cash so your business can pay bills, meet payroll, purchase inventory or equipment, manage overhead, fund expansion, and increase profits. Over the years many Fortune 500 companies have enhanced their growth using accounts receivable financing.
During the challenging economy many banks have declined business loans or lines of credit. Factoring provides an option even when banks say no since it is based on the credit worthiness of the customers paying the invoices. This means new companies may qualify and strong financials are not required.
These are just a few of the many advantages of selling invoices over increased debt. For more information please read the Benefits of Factoring and Frequently Asked Questions.
Accounts Receivable Factoring Example
The amount of the advance, reserve, and factoring fee can vary by industry, customer strength, and how long it takes the customer to pay the invoice.
Some factoring companies might charge a small one-time set up fee to the business upon acceptance. Others will waive the set-up fee depending on the volume and length of the factoring contract. While the assumptions may vary from the example, they will always be clearly spelled out upfront in the proposal and agreement between your business and the factoring company.
Top 10 Benefits of Factoring Invoices
Does your business need working capital to pay bills, fund growth, or negotiate discounts?
All business owners experience the ebb and flow of cash flow but with banks tightening the extension of credit many options are dwindling. Fortunately, accounts receivable funding is going strong after decades of continued growth. Invoice factoring options are now more flexible and cost less than ever before.
It is this distinction between selling invoices and obtaining credit that plays a key role in the many benefits unique to factoring.
Factoring companies will fund an immediate cash payment on the invoice amount, collect payment from your customer, and release the reserve balance less the factoring fee to you.
Rather than a loan, factoring is the purchase of outstanding invoices at a discount.
1. FAST ACCESS TO CASH
The factoring process is quick and easy with funds provided within 24-48 hours on approved invoices. The initial setup averages 5-10 days from receipt of the factoring application and supporting documentation. That’s lightening fast compared to the weeks and months it takes most banks to decide on business loans.
2. CASH FLOW WITHOUT DEBT
Since factoring is not a loan it doesn’t add to the liabilities on your balance sheet. That means no monthly loan payments and a clean balance sheet.
3. Flexible Terms
There are no long term contracts, minimums, or maximums with many of today’s factoring programs. Pick and choose how often and what invoices you want to factor. Factoring is designed to grow with you so as sales increase so does your access to funding.
4. Reasonable Factoring Fees
The cost of factoring invoices has come way down over the years with advances available up to 95% and fees as lows as 1.5%. The fees vary by industry, volume and number of invoices, advance rates, customer creditworthiness, and how long it takes customers to pay. To find out exactly what programs are available for your business please use our
Invoice Factoring Application.
5. Stay in Control
You need cash, not a boss! Factoring companies don’t dictate how you spend the funds. There are no requirements to buy equipment or other assets.
6. Relieve Stress
No more waiting on your customers to make payments so you can make yours. Pay bills, meet payroll, and remit taxes on time without worrying about late fees or damaged credit.
7. INcrease the Bottom Line
Many companies use factoring to increase profits or fund growth. Take advantage of early payment discounts, negotiate bulk discounts from suppliers, increase inventory for large orders, or add the staff and overhead required to fund expansion. When structured thoughtfully it is possible to use factoring to either save or make money far in excess of the factoring costs.
8. STRONG FINANCIALS NOT REQUIRED
You don’t need great credit, years in business, or a long strong financial history to qualify for factoring services. The factoring company looks to the strength of your customers paying on the invoices, rather than you. That is good news if your credit or business has hit a few bumps in the road as you try to build (or re-build) your business.
9. Confidently extend Terms to Customers
Increase sales with the ability to offer credit terms to new or large customers without hurting cash flow! Plus the factoring company will help you underwrite your new or existing customers ability to pay so you can avoid extending terms to high risk candidates.
10. Professional Receivable Management
Save time, reduce in-house expenses, and improve the turn time on your receivables with professional management. Factoring companies will skillfully handle the paperwork, processing, headaches, and collection of payments on your invoices.
Get Started - Apply Now
Why wait 30, 60, or even 90 days for your customers to pay you?
We can help turn invoices into cash with accounts receivable factoring!
Selling business invoices can provide the cash flow relief to pay bills, make payroll, fund growth, and increase profits!
OPTION 1
Print the Application
Complete the PDF Application.
Fax it to us at (805) 435-1947.
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