Authored by Phil Cohen
Factoring can be a handy way for businesses to improve cash flow, but how fast can you get that cash in the bank? Traditional funding methods like bank loans can take weeks for application, underwriting and approval, but factoring can be almost instant. We’ll walk you through an example of a typical factoring timeline so you can have a better idea of what to expect with this financing method.
How Fast Is Factoring?
When a business factors its unpaid invoices, it sells them to a factoring company and receives about 90% of the invoice value up front, with the rest paid when the customer pays. The factoring company takes a fee, either out of the up front payment or in a tiered payment system.
When you factor invoices, you can get cash in just a day or two. Here’s how the process works.
Initial Inquiry
Response time: Minutes
The timeline begins when you reach out to the factoring company, whether directly or through a broker like Factor Finders. Ideally, you’ll get a response right away. (Factor Finders, for example, often answers on the first ring.)
Once you’ve reached the factoring company, you’ll typically provide some basic information, such as:
- Your business name and industry
- Information about your customers
- The nature and volume of invoices to be factored
Finding a Match
Response time: 24-48 hours
With the information you provided in hand, the factoring broker will immediately begin sourcing factoring companies that can help you. The best factoring brokers have large networks of factoring companies, so they should be able to find one or more who specialize in your industry. They’ll also be looking for factoring companies that offer terms and rates that work for your needs.
At Factor Finders, we live transfer our clients in minutes to the best possible funder for your circumstances.
Approval and Setup
Response Time: 24-48 hours
Once you’ve submitted your application, the factoring company will review your documentation and do a credit check on your customers. Factoring companies focus more on your customers’ creditworthiness than yours. That means even if your business has a limited credit history, you can qualify for factoring.
The approval process usually takes just one or two days. After you’re approved, you can sign a contract with the factoring company and set up your account. At this point, your invoices are officially ready to be factored.
Payment Disbursement
Response Time: 1-2 business days
Once your account is set up, the factoring company can immediately disburse your funds – usually 90% of the invoice value. You’ll get the remaining balance (less the factoring fee) once your customer settles the invoice with the factoring company.
You’ll get your first payment deposited into your bank account within one to two days of submitting your invoices. That means the entire factoring process, from the first inquiry to when the cash hits your account, can take just three to five days.
Ongoing Factoring Timeline
Once you’re set up with a factoring company, future invoice submissions can go even faster. After submitting your invoices, you’ll typically receive your advance within 24 to 48 hours, and the remainder of the funds once your customer pays.
The Bottom Line
When you need cash for your business, you don’t always have time to wait around. Factoring your unpaid invoices is a way to get funds fast, with no debt and no interest charges. With a typical timeline of three to five days from inquiry to cash in hand, factoring is one of the fastest ways to secure working capital.
Contact us to connect with the right factoring company for your needs.