What is invoice factoring?
Invoice Factoring is an alternative option for financing your business cash flow. A factoring company will give you money upfront while you’re waiting for payment from your customer. This way, you’ll be able to continue with business as usual with your money in the bank to operate your business.
Is accounts receivable factoring a loan?
No. When a company factors its accounts receivable, the factoring company purchases the accounts receivable rather than lending against them.
Is factoring better than a loan?
Companies often need more money than they can get through a traditional loan/line of credit. Factoring can offer more cash to the company based on their accounts receivable.
How does invoice factoring work?
Your business submits unpaid invoices to the factoring company. The factoring company then advances money against eligible invoices. The factor then receives the payment directly from your customer.
What types of invoices are eligible for factoring?
Current, unpaid invoices due from another company to your business.
How does the factoring company get repaid?
Accounts Receivable are repaid directly by Account Debtors.
How quickly will my business receive money?
Once your factoring account is established, your business typically receive money within 24 hours of submitting eligible invoices.
How much does factoring receivables cost?
Fees depend on the industry and the volume. Contact us for more information.
What is the typical factoring advance rate?
It varies by industry. Advances are usually around 80%.
What are the benefits of factoring?
Factoring provides money upfront while your company waits for clients to pay their invoices. Additionally, you do not accrue any debts to the factoring company.
What’s the difference between recourse and non-recourse factoring?
Recourse factoring requires the client to pay back accounts receivable if the factoring company isn’t able to collect payment. Non-recourse factoring doesn’t require clients to buy back unpaid invoices but the factoring fee is higher.
What will customers think?
Chances are your company’s customers are already familiar with factoring and they might even use a factoring service themselves. Simply explain that you use a factoring company and the benefits it provides.
