Factoring is a powerful financing tool!
Tens of billions of dollars of factor financing is provided in the United States each year. It is used by both large corporations and small businesses. Factoring keeps a steady flow of cash coming into your business. Instead of waiting 30, 60, or 90 days to get paid, you can get cash in usually 24 hours on work performed. Businesses repeatedly see 20% to 50% growth in their first year of factoring.
To qualify, you have to be a business that provides a product or service for another business and create an invoice. A Factor buys that invoice at a discount and forwards you an advance usually within 24 hours. The advance, determined by industry and average speed of payment, allows you to keep your business operating. The Factor collects on the invoice, deducts their small fee, and sends you the rest of your payment.
Factoring is No Debt Financing
Since factoring is not a loan, then no debt is added to a business. Instead, since receivables are being turned into cash, a positive cash flow is taking place. Credit lines are kept open for other needs. Also, the only collateral pledged in a factoring arrangement are the receivables being turned into cash. No homes, equipment, or any other hard assets are required.
Many Factors provide credit checks of a business's prospective clients before a contract is signed with them. These credit checks help to protect businesses from chasing bad debt.
The accounts receivable collecting that is part of the factoring service allows a business to focus on sales instead of chasing collections. The advance provided allows business owners take advantage of vendor discounts by paying their suppliers within a specified time. And with financial strength behind them, businesses will be able to take advantage of more lucrative accounts.
Don't let slow paying customers hold your working capital hostage. Free up that money by factoring. The application process is simple and quick. Contact us today to see just how simple it is. No application fees, start up fees, or hidden fees.
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Factoring is also known as invoice factoring, invoice financing, or accounts receivable financing. In the trucking industry, you may hear it referred to as freight bill financing. No matter how it is referred to, you can see that it involves the payment of an invoice. This is the first test to pass to know if you qualify for factoring; you are invoicing another business for payment.
One of the most helpful features of invoice financing is that it is available to startup companies. You do not have to have business history to qualify. As long as you are providing a product or service for another business, then you can apply for this type of financing.
The dollar amount of billing you are invoicing is part of the equation that determines your financing fee. But as you grow, you can continue to qualify for a lower financing rate. Not all Factors provide the same monthly range of factoring amount. Some do thousands per month, other do millions. Some will provide amounts of $0 to millions of dollars per month. Others will only do accounts of millions.
What is recourse factoring?
Recourse factoring is where the Factor does not accept the credit risk involved. If the client does not pay the invoice within a specified timeframe, the advance must be paid back to the Factor. Usually an arrangement can be made to pay back the advance over a period of time.
What is non-recourse factoring?
Non-recourse factoring is where the Factor accepts the credit risk involved. If the factor okays the credit of your client, then they will not require the advance to be paid back in case of default.
Factoring is a financing facility that provides working capital financing, credit risk protection, and accounts receivable collection and bookkeeping services.
The business now has access to a steady flow of cash, less worrying about having to chase bad debt, and can grow a sales department instead of an accounts receivable department.