Obviously, this problem would not exist if customers paid their invoices quickly. However, getting a quick payment from customers is very difficult and many react negatively to quick payment requests. However, you can get a benefit of quick payments without requiring your customers to pay any sooner by using invoice factoring.  Factoring provides an advance on your slow paying invoices. Factoring companies will usually finance up to 85% of your open outstanding invoices. This gives you immediate access to funds that can be used to cover critical supplier expenses. It can also provide predictable cash flow which enables you to operate your business more smoothly.

As opposed to other types of funding, factoring companies do not require that your company have sizable assets that will be used as collateral. Factoring transactions use your invoices as their main collateral. Because of this, it is very important that your commercial customers have outstanding credit. As a matter of fact, the whole transaction depends on this. Additionally, your company should be well run and should not have any major legal or tax issues.

One attractive benefit of factoring is that it can also be combined with purchase order financing. Purchase order financing is a funding solution that covers your supplier payments for existing purchase orders that require a prepayment. When properly combined with factoring, it can be used to provide end to end financing for larger food transactions. Additionally,  factoring lines are designed to fit very well with growing companies that have an entrepreneurial culture. This makes it a very attractive solution for retail food brokers that have growth problems and need funding.

This leads to the question – what happens if your factoring application has a number of inaccuracies and omissions? The most likely outcome of this is that your application will be declined. Sometimes, the factoring company may overlook small issues, but they will not overlook big ones. As a matter of fact, most factoring companies will double check information that is on the application against available public record information. This enables them to verify if the prospect has any:

• Lawsuits
• Judgments
• Tax liens
• Conventional liens
• Criminal records

Applications have inaccurate information or omissions because of the  business owner’s underlying fear that the application will be declined if they disclose everything. It is possible that the application may be declined if it has substantial negative information. However, it is guaranteed that the application will be declined if substantial negative information is omitted or presented inaccurately. This leads us to her next question – so what do you do if your application is less-than-perfect?

If your accounts receivable factoring application is less-than-perfect, your strategy should be twofold. First, you should honestly disclose all information that the factoring company is asking for. Second, you should approach the factoring company with a plan that shows how you will improve your situation. Since factoring companies are used to working with companies that have cash flow problems, they are likely to be very receptive to this type of an approach. Additionally, they’re likely to respect a business owner who calmly and candidly addresses their problems. And if they don’t you are better off finding out sooner rather than later.

Disclaimer: This article is for informational purposes only. It should not be considered legal or financial advice. Only a qualified professional can provide that advice and you should seek one if you require it

One way to solve this common cash flow problem is to ask customers/shippers for quick pays. It’s common for trucking companies to offer some customers a 2% discount if they pay an invoice in 10 days. This strategy can be very effective at accelerating your revenues and ensuring that you always have the working capital to meet expenses. However, the strategy has one important drawback. It leaves your cash flow in the hands of your customers who could eventually go back to paying their invoices slowly. For many trucking companies, freight factoring can provide more predictable and reliable alternative.

Factoring freight bills can provide a similar outcome to quick pays without requiring customers to pay any sooner. The transaction works using a financial intermediary – known as a factoring company. The factoring company advances up to 90% of the gross value of your outstanding invoices/freight bills as soon as the load is delivered. You get the remaining 10%, less the cost of funding the invoice, as soon as your customer pays in full on their regular schedule. This last point is important, as it allows your customers the flexibility to pay on their usual schedule.

Most factoring plans are designed to be accessible to transportation companies, including one truck owner operators. Since the factoring company is financing your freight bills, it’s important that your customers have good commercial credit. Your invoices are the most important collateral that the factoring companies using. Additionally, your company needs to be clear of major legal or taxation problems.

One advantage of factoring freight bills is that the financing facility is designed to support growth. The line will increase as your sales to credit worthy customers grow. This makes factoring an attractive option for growing transportation carriers and brokers.

Of course, this would not be a problem if customers paid their invoices quickly. And this can be accomplished, sometimes, by offering them a 2% discount for a quick pay. This is a common strategy in the industry and it can produce good results. The drawback of the strategy is that your customers are still in control of when you’re payments flow in – and could change their mind at any time. For many companies, a better strategy is to use freight factoring.

Freight factoring accomplishes the equivalent of getting a quick payment without actually asking your customers to pay sooner. It works using a financial intermediary – a factoring company – that finances your open freight bills. Basically, the factoring company advances your company up to 90% of the gross freight bill value as soon as the load has been delivered. The remaining 10%, less a fee, is advanced once your customer pays in full.

When used correctly, a factoring line can provide the money that your transportation company needs to cover its expenses. Additionally, it will also provide a solid platform that can be used to take on new clients since concerns about slow payments will be minimized.

Qualifying to factor your freight bills is easier than qualifying for most conventional financing. First and foremost, your company must work with shippers and brokers that have a good commercial credit score. This is extremely important because your freight bills – and your customers ability to pay them – is that collateral for the transaction. Additionally, your company should be well managed and free of major legal or tax issues.

One important advantage of factoring over other sources of financing is that the line is growth oriented. The size of your factoring facility will increase as your qualified sales grow. This is a feature that is seldom found in other business financing programs. This makes factoring an attractive funding option for growing transportation companies.

Let’s start by describing a common situation for many companies. Companies that sell to other companies or to government entities usually have to offer payment terms. This means that they need to give the customer up to 60 days (or some other negotiated term) to pay an invoice. This can create a problem for small and growing companies because they need to cover the expenses of delivering the service/product immediately. But payment comes in two months. This can be difficult and companies with small cash reserves will find themselves with problems. They will either turn away customers that are demanding terms, or they will offer terms and run into cash flow problems when they realize that they can’t pay their own expenses.

Of course, this would not be a problem if all customers pay quickly. And this is where factoring comes in. Invoice factoring can provide similar benefits than having customers pay quickly. It works by using a financial intermediary, called a factoring company, that advances money to your business and uses your invoices as collateral. The transactions conclude when your customers pay their invoices in full – on their regular schedules.

What makes factoring very attractive to small and growing companies is that it has simple collateral requirements. The most important requirement is to have credit worthy customers. The whole transaction is based on the fact that you can leverage your invoices from credit worthy customers to your advantage. Of course, there are other requirements such as having good invoicing practices, being free of major legal or tax problems, and having a well-run business. However, invoice factoring is available for small and growing companies whose main asset are good customers.

More importantly, factoring is ideally suited for growing companies. The line is adaptive and will increase as your company grows. This ensures that your company has a solid financial footing that enables it to take on new customers. Given that factoring is flexible and easier to obtain than comparable products, it’s considered an ideal solution for growing companies that have working capital problems.

From a factoring company’s perspective, rates are associated with risk. This means that if they perceive the client to be risky, they will charge higher rates to compensate for that. However, if they perceive the client to be less risky, they will lower their rates. The right strategy to get the best factoring rates involves doing two things:

1. Select the factoring company that has experience with your industry
2. Presenting your company and your application professionally

Determining if a factoring company has experience in your industry is relatively easy – all you need to do is ask them. However, it’s always a good idea to ask some in depth questions to verify that your financing company really knows about your industry. For example, if you’re in the transportation industry, the financing company should be comfortable with all the necessary documentation needed to deliver and accept loads. Additionally, the factoring company should be familiar with all the major shippers and carriers and their procedures. Lastly, it also helps to ask them for references that are in your industry and that have been with the factoring company for at least one year.

Once you have selected which factoring companies you’re going to apply to, the second step is to actually submit the applications. This is where most prospects go wrong. It’s common for prospects to turn in sloppy applications that are hard to read and are missing important information. Most factors see this as a troubling sign and will adjust their  rates accordingly. You should always submit a well-crafted application that is easy to read and has all the required information. If any information is missing, you should make an effort to note that on the application, explain why it’s missing, and advise the factoring company as to when they will receive it.

It is not unusual for factoring prospects to have less than ideal circumstances. Many try to hide this fact from their application. Sometimes they omit details or even critical documents. In other cases, they just enter completely inaccurate information. This can be a serious mistake that will almost always lead to higher factoring rates – or worse – having your factoring application declined. Factoring companies are trained to look for problems and will easily catch any missing information. Additionally, they also do public records searches, which are very helpful in determining if any critical facts have been omitted or are inaccurate.

This opens the final question – what do you do if your situation is less than perfect? Remember that many companies that look for factoring do so because they have growth or cash flow problems. Factoring companies are used to working with companies that have less-than-perfect situations. As long as your situation is workable, there is a very good chance that the factoring company will be willing to help you. The best strategy in these situations tends to be a combination of full disclosure and good planning. You should provide your financing company with a full and honest picture of your situation early on, along with the plan of how you will turn things around. This last point is critical – you must have a plan to improve things. Many factoring companies will react positively to this and will be willing to help you. And if they’re not willing to help you, it’s best that you find about it early on in the process.

Factoring in Canada is designed to help companies that have cash flow problems because they do business with corporate customers that pay their invoices and up to 60 days. From a capital perspective, your company has to spend money to deliver the service and then wait up to two months for payment. Few companies can afford to do this and grow at the same time. Of course, companies would not have these problems if customers paid their invoices within a few days of receiving your product/service. And this is where factoring your invoices comes in.

Factoring provides a similar benefit to a quick payment, without actually requiring your customers to pay sooner. Rather, a factoring company advances funds to your business using your open invoices as collateral. Usually, factoring companies advance anywhere between 80% to 90% of your invoices as soon as the work is completed. You get the remaining 10% to 20%, less the financing fee, once your customer pays in full.

One important advantage of factoring over other solutions is that it has easier collateral requirements. From a collateral perspective, the most important requirement is that your customers must have good commercial credit. This is most important because your customers payment ability acts as collateral for the transaction. Additionally, your company needs to have good invoicing practices, be free of major problems, and be operated by knowledgeable managers.

One clear benefit of factoring your invoices is that it’s one of the few forms of financing that allows you to leverage the credit strength of your customers to your own advantage.  Additionally, most factoring lines are designed to be indexed to your sales – this means that the line will increase as your sales to credit worthy customers grows. This makes invoice factoring an attractive solution for growth oriented companies in Canada that have cash flow problems due to slow paying clients.

One way to solve this problem is to get customers to pay sooner. Some customers may be enticed to pay sooner if you offer them an incentive, such as a 2% discount for payment in 10 days or less. While this strategy tends to work reasonably well, it also has one drawback. Your customers remain in control of your payments and could change when they pay at any time. There is another way to accomplish something that is similar to a quick payment though. You could use a factoring financing line.

Invoice factoring works by using a financial intermediary that provides an advance on your open invoices from credit worthy companies. The financing company holds the invoice as collateral until it’s paid by the customer on their regular schedule. This provides a similar effect to quick payments without actually requiring customers to pay any sooner.

Qualifying for invoice factoring is relatively easy, at least when compared to other options such as business loans. The most important collateral requirement is to have invoices from companies that have solid commercial credit. Additionally, your company should have good invoicing practices, be free of major problems, and be managed by knowledgeable and reputable individuals.

Most accounts receivable factoring lines are designed to support growing businesses. The line is flexible and will increase as your revenues grow, provided that your sales are to credit worthy companies. Because of this, invoice factoring is an ideal alternative for seismic testing companies that need business financing and can’t qualify for a line of credit.

Let’s start by defining factoring. Factoring is a form of financing that helps companies that have working capital problems because their customers are taking up to 60 days to pay their invoices. It provides an advance on the open invoices, providing the liquidity that the company needs to pay operating expenses. By accelerating the revenues that are locked in slow paying invoices, working capital is optimized and companies can focus on growing their sales.

Your company may be able to benefit from factoring if you meet the following criteria:

1. You have commercial or government customers with good credit
2. Your customers are taking up to 60 days to pay their invoices
3. You need working capital to cover operational expenses such as payroll, suppliers, and rent

Invoice factoring has two advantages over other common business financing solutions. The first advantage is that it’s easier to obtain. The most important collateral requirement is to have customers with solid commercial credit and good invoicing practices. The second advantage – and perhaps the most important one – is that the line is indexed to your revenues. The financing line will increase as your sales grow, provided that you meet the factoring financing criteria. This makes it an ideal source of growth financing for companies that have working capital problems that originate from slow paying customers.

Let’s start by defining factoring. Factoring is a type of business financing that helps companies that have cash flow problems due to slow paying customers. Most commercial sales – whether selling products or services – are structured to provide the customer up to 60 days to pay their invoices. This is called “selling on terms” or “selling on credit”. This is a common practice in the industry and companies that want to remain competitive have to offer it, otherwise customers will go somewhere else. The problem with offering payment terms is that many companies, especially smaller companies, can’t afford to do so. They need the funds sooner so that they can pay their own expenses.

This is where invoice factoring comes in. A factoring company provides financing using your accounts receivable as collateral. Basically, you get an advance on your slow paying invoices, which provides you with the working capital you need. This type of financing is ongoing but individual transactions settle once each invoice is paid.

The most common type of factoring is called full recourse factoring. With this type of financing, your company is fully liable for any unpaid invoices. If your customer does not pay for your invoice because there is a dispute, they have financial problems, or they simply don’t want to pay, your company has to return the funds to the factoring company. Usually this is done by debiting your reserve account or having you provide a substitute invoice to cover the one that did not pay.

A less common type of factoring, and also the most misunderstood, is called non recourse factoring. Nonrecourse factoring operates in a similar way to recourse factoring with the exception that your company is not liable if your customer does not pay the invoice due to a financial insolvency during the factoring period. In other words, you don’t have to pay the factoring company back if your customer declares bankruptcy or a formal insolvency during the first 90 days from the time that the invoice was purchased (referred to as the factoring period). However, your company is usually liable for any nonpayments due to disputes or any other reasons. Although nonrecourse factoring provides very valuable protection – it is also a very narrow protection. It is very important that you and your attorney examine the factoring agreement so that you understand what protections are being afforded.

Of course, the obvious question is – which one is better? The answer is not as easy as it appears and it’s often the subject of heated debate in the industry. You should go with whatever type of invoice factoring you you think will benefit your business the most. However, bear in mind that most factoring companies will do extensive credit research on your invoices before financing them. Because of this, there is only a small likelihood that they will buy an invoice that has a chance of defaulting. Which brings us to the closing point, one important benefit of factoring is that the factoring company can act as your credit review advisor. And if you use their services correctly it may help you reduce bad debts by ensuring that you only sell to companies that have the best credit quality.

Companies go out to the marketplace to get business financing because they have a specific business problem that they want to solve – they need to buy equipment, property, make payroll, pay suppliers, or cover many of the other expenses that companies incur. With this in mind, what is the specific business problem that factoring your invoices will solve? Invoice factoring helps companies that have cash flow problems because they can’t afford to wait 30 to 60 days to get paid by their commercial customers. This problem arises from the fact that most commercial sales are done on terms, which means that you deliver the product/service now, but get paid for it later. Few companies can afford this.

As a rule of thumb, factoring should be able to help your company if the following is true:

1. You have credit worthy commercial or government customers
2. Your customers are taking 30 to 60 days to pay their invoices
3. You need the funds sooner to cover ongoing operational expenses

Some examples of companies that use factoring are staffing agencies that need liquidity to meet payroll, trucking companies that need money to pay for fuel and repairs, distributors that need to pay suppliers, and many other types of businesses that have ongoing operational expenses. Now that we know what problems are solved by factoring and who does it help, the next question to ask is how does it work?

Most factoring transactions are structured to advance money to your company using your invoices as collateral. The factoring company advances anywhere between 80% to 90% of your outstanding accounts receivable as soon as you invoice your customer for completed work. Your company gets the remaining 20% to 10% (less the fee) as soon as your customer pays the invoice on their regular schedule. Basically, factoring accelerates the collection of your revenues in exchange for paying a fee to a financing company.

One of the advantages of factoring over other business  financing solutions is that it’s easier to obtain. Usually the biggest requirement is to have commercial customers with good credit and have a well-run business. But the biggest benefit from factoring comes from its flexibility – the line is indexed to your sales and will increase as your sales grow, as long as you meet the factoring criteria. This makes it ideal for growing companies that have cash flow problems due to slow paying customers.

Usually, your company will be a good candidate for this type of financing if all or some of  following statements describe your situation:

1. You are having problems making payroll
2. You are having problems paying suppliers
3. You are having problems taking on new clients because you can’t offer them payment terms
4. Your customers have good commercial credit, and lastly,
5. Your company has good invoicing practices

For larger companies, offering payment terms is usually not a problem because they have substantial cash reserves. They can use those cash reserves to meet current operating expenses and then replenish them once the customers pay their invoices. Smaller companies don’t usually have any substantial cash reserves, which leaves them at a disadvantage.

This cash flow shortage can easily be solved by complementing your existing cash reserves with an invoice factoring line. Invoice factoring is a form of financing that accelerates the revenues that are tied to your slow paying invoices. This provides you with the needed liquidity to meet your ongoing expenses so that you can operate your business with confidence. More importantly, it provides predictability to your revenues which enables you to take on new customers without worrying about giving them payment terms.

Factoring transactions are structured through a factoring company that advances funds for your invoices as soon as the work is completed. They also settle the transactions once your customers pay their invoices in full on their regular schedule. Most companies use invoice factoring as a source of ongoing financing, which ensures that they always have to cash on hand to meet working capital demands.

Most factoring transactions are structured using two installments payments. The first installment is called the advance, and covers about 80% of your outstanding accounts receivable. This is provided immediately upon invoicing. The second installment, called the rebate, is provided as soon as your customer pays in full. The rebate covers the remaining 20%, less the financing fee.

One of the more important benefits of invoice factoring is that it’s easier to obtain than most conventional business financing products. The transaction uses your invoices as collateral, so it’s very important that your customers have good commercial credit. Aside from that, your company needs to be well managed and have good invoicing practices.

A clear advantage of accounts receivable factoring over other solutions is its flexibility. The financing line is tied to your sales, which enables it to increase as your sales grow. This makes invoice factoring an ideal solution for offshore oilfield marine transportation companies that  are experiencing growing pains due to slow paying customers.

A simple way to solve this problem is to use business financing as a stop gap measure to cover your operational expenses while waiting for customers to pay. Unfortunately, most loans are very difficult to get in the current economic environment. Lending institutions have very strict requirements and will only lend to companies that have strong income statements, substantial assets that can be used as collateral, and a long track record of profitability. These criteria rule out most waste disposal companies. Fortunately, a business loan is not the only (or the best) way to fix the financial problems created by slow paying customers. For many companies, invoice factoring is a much better solution.

Factoring solves the problem created by slow paying customers by accelerating the revenues that are tied to your slow paying invoices. Basically, a factoring company advances funds to your waste disposal company using your invoices as collateral. This ensures you have the cash at hand to cover operational expenses. More importantly, it ensures you can take on new customers without worrying about their slow payments. The factoring transaction is settled once your customer pays their invoice in full.

Getting a factoring financing line is easier than getting a conventional business loan. The most important requirement is that your customers – whether they be commercial, medical or government – must have a good track record of paying their invoices. It’s ok if they pay slowly, as long as they pay. Additionally, your company should also:

1. Invoice for completed work
2. Must not be encumbered legal or tax problems
3. Invoice must be free of liens
4. Company owners must have industry experience and a good reputation

One of the advantages of accounts receivable factoring over other solutions is that the line is designed to grow dynamically with your sales. The line will increase as your sales grow, provided your company meets the factoring criteria. This makes factoring financing an ideal solution for waste disposal companies that have cash flow problems due to slow paying customers.

One way to solve this problem is to use business financing to cover expenses while waiting for customers to pay their invoices. Unfortunately, this is easier said than done. Most financial institutions have very strict financing criteria and will only fund companies that have substantial collateral, sizable assets, impeccable financials, and a track record of successful operations. In reality, few small or midsize companies meet these criteria. Fortunately, there’s a new alternative that has been gaining traction in the industry. It’s a form of financing known as factoring.

Invoice factoring solves this problem by accelerating your revenues. Basically, a factoring company makes a funding advance to your warehousing and distribution company based on its outstanding invoices. The transaction is structured so that you get a large percentage of your accounts receivable up front, which provides you with the needed working capital to run your business. Transactions are settled once your customers pay their invoices in full on their usual schedule. Please note that your customers are not required to pay any sooner.

One of the benefits of accounts receivable factoring is that it’s easier to obtain than conventional business financing. The most important requirement to qualify is to have credit worthy commercial customers. This is critical since their invoices – and more importantly their credit worthiness – acts as collateral for the factoring transaction. Additionally, your company should also meet the following requirements:

• Your company should only invoice for compleated services
• Your invoices should be unencumbered
• Your company should not have any serious legal or tax problems
• Company owners should have industry experience and a solid reputation

Freight factoring lines are designed to work with growing companies and can increase dynamically as you book new sales and customers. This is an important feature because many  companies experience growth once they get the financial stability that factoring provides. Because of this, factoring is an ideal solution for growing warehouse and distribution companies that have working capital problems that are related to slow paying customers.