What is Invoice Factoring?
The quick answer - invoice factoring is a financial solution that helps companies with cash flow problems because of slow paying customer invoices. It finances slow paying receivables and provides you with immediate working capital to run, and grow, your company.
The big challenge - is this happening to your company?
Most small business owners are often faced with the challenging reality of having to offer term credit to their commercial and government customers. Basically, large customers demand the option to pay their invoices in up to 60 days. Clients pay slowly for a number of reasons, but mostly because it improves their own working capital. The problem is that they do this at your expense.
And if your company does not have the financial resources to wait for payment, it will run into problems. It may not be able to pay suppliers - or worse - employees. And it may have to stop accepting new orders until payments come in simply because it cannot afford to offer payment term credit.
The solution - finance your invoices
Although you cannot force your clients to pay sooner, you can get the many of the benefits of a quick payment by factoring your invoices. It allows you to finance open invoices from commercially credit worthy clients. This accelerates your revenues and provides you with immediate working capital that can be used to run your company and to take new orders. The solution has a number of advantages and when used correctly, it provides financial stability and predictability to your revenues.
How does it work?
The transaction uses a factoring company to fund your invoices. They provide the financing and use your accounts receivable as collateral for the transaction. Your invoices are funded in two transactions installments called the advance and the rebate. You receive the advance as soon as the invoice is factored, and you get the rebate as soon as your client pays the invoice in full. Most transaction follow this format:
- You deliver your product or service to your commercial client
- You send an invoice to the client
- The factor advances 85% of the invoice as the first installment. This is wired to your bank
- After 30 to 60 days, your client pays
- The factor rebates the remaining 15%, less a service fee. This is wired to your bank
Does my company qualify?
The most important requirement to qualify is to have solid customers with good commercial credit. This is very important because the factor uses your invoices as collateral for funding. Also, your company should now have liens against it's invoices and should not have major tax issues. Most small companies that meet this criteria should be able to qualify for this solution.
One advantage that sets invoice factoring apart from other solutions, such as business loans, is its flexibility. The line is designed to adapt to your revenues and can increase alongside your sales. This makes it an ideal solution for companies that are about to experience a growth phase.
Most facilities can be deployed quickly - in a matter of days. Usually you can get a proposal the next day after submitting an application. And the line becomes active soon after you accept the contract. To improve your chances of success, be sure to read about application success strategies and how get the best rates.
Factoring rates as low as 1.5% for qualified clients
Get an an online quote or call (866) 730 1922. USA and Canada
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