Why Use a Broker?

Why Choose Factor Finders?

Home » Industries Served » Factoring for the Service Industry

Factoring for the Service Industry

The Simple Cash Flow Solution for Service Providers

If you offer your professional services to businesses that are slow to pay, close your cash flow gap with Factor Finders’ invoice factoring for service providers!

Many companies outsource important but infrequent business operations to professional service providers rather than employing an in-house team. While these contracts are attractive, they may not give you sufficient working capital if their needs are cyclical or if they are unable to pay you in a timely fashion. Bank loans may be an option if you can meet their stringent approval criteria. However, if you are just starting up, have faced financial difficulty in the past, or lack adequate collateral to secure your account then those conventional loans are likely out of reach.

Invoice Factoring Works For Service Providers

Fortunately for service providers, invoice factoring is a viable option! Factoring is an alternative option for financing your invoices, which uses the invoices themselves as the base for advancing funds. Once you are approved, you can qualify to receive as much as 90 percent of your invoice value immediately with a reserve payment of the remainder when the factor collects. Business factoring is a simple process:

  1. Submit your valid, unpaid invoices for work completed
  2. The factoring company will verify the invoices and advance you money within 24 hours
  3. Your clients will pay the service factoring company directly
  4. The factor will send you the remainder of your invoice value, minus a small factoring fee

What are Advance Rates?

Advance rates, which play a crucial role in factoring, are an essential aspect to consider when engaging in this financial practice. While many clients prioritize securing the lowest possible rate, it is important to note that the actual cost of factoring depends on a combination of the factoring rate and advance rate. The advance rate, specifically, varies across industries and is determined based on factors like industry norms and perceived risk.

Types of Invoice Factoring

Invoice factoring is a financial solution that involves selling your unpaid invoices to a third party, known as a factor, in exchange for immediate cash flow. There are generally two types of invoice factoring options available: full recourse and non-recourse factoring.

Full recourse factoring allows the factor to sell an unpaid invoice back to you if it remains unpaid after a specified period, usually around 90 days. This means that if your customer fails to make the payment within the given time frame, the responsibility of repayment falls back on you as the business owner.

On the other hand, non-recourse factoring offers a different approach. Under this arrangement, the factor cannot sell the unpaid invoice back to you after the given time period, as long as the non-payment is due to credit-related issues. However, it is important to note that the precise definition of a credit problem may vary among different factoring companies. Some factors may consider a credit problem to be a declared bankruptcy, while others may have different criteria.

Choosing between full recourse and non-recourse factoring ultimately depends on your personal preferences and specific business needs. In the past, there used to be substantial differences in pricing between these two types of factoring. However, in recent times, the pricing gap has significantly diminished. Additionally, full recourse factoring plans may offer more flexibility compared to non-recourse plans.

Does Your Company Qualify?

Factoring is a financing option that typically has more lenient qualification requirements compared to other forms of financing, such as loans or lines of credit. To determine if your company qualifies for factoring, there are a few key factors to consider:

  • Client reputation: For factoring, it is important that your company’s outstanding invoices are due from reputable commercial or government clients. This ensures that the invoices hold value and can be effectively transferred to the factoring company.
  • Lien and encumbrance-free invoices: The invoices you submit for factoring should not have any liens or encumbrances attached to them. This allows for a smooth transfer of ownership to the factoring company, providing them with assurance that they can collect payment from the clients.
  • Tax and legal compliance: It is preferable for your company to not face any major tax or legal issues. While having a clean record in these areas is ideal, companies with tax issues can still be eligible for factoring as long as they have a tax payment plan in place. This demonstrates your commitment to resolving any outstanding tax matters.
  • Management experience: Another important consideration is the industry experience of your company’s management team. While not always a strict requirement, having knowledgeable and experienced individuals at the helm of your business provides credibility and can bolster your eligibility for factoring.

How to Select a Factoring Company

Selecting the right factoring company is a crucial decision for your business, and it requires careful consideration. To guide you in this process, here are several key points to keep in mind:

  • Clarify your needs: Before diving into the selection process, take the time to assess your specific needs and requirements. Determine the amount of funding you require, the frequency of cash flow gaps, and any particular industry considerations that may affect your factoring needs.
  • Research and evaluate multiple options: Instead of submitting applications to every factoring company you come across, narrow down your search to two or three companies that align with your criteria. This prevents overwhelming yourself and allows you to focus more effectively on the evaluation process.
  • Consider competitiveness: The factoring market is highly competitive, which works in your favor as a client. Obtain quotes from at least two to three companies and carefully compare them to assess which proposal offers the best value for your specific needs. Remember that while price is important, it should not be the sole determining factor. Take into account the overall proposal and compare various points.
  • Assess experience and longevity: A factor’s experience and longevity in the industry are vital factors to consider. Ideally, choose a company that has been operating for a significant amount of time, preferably five years or more. A well-established company is more likely to possess the knowledge and expertise to manage a factoring portfolio effectively, including during economic downturns. However, if you consider a relatively new company, ensure that it is owned and managed by experienced professionals in the industry.
  • Industry specialization: Although most factoring companies claim to be generalists, many have expertise in certain industries. Optimal results are achieved when working with a factor that understands the specific nuances and requirements of your industry. To determine their familiarity, directly inquire about their experience working with companies in your industry.
  • Size considerations: While many factoring companies boast the ability to fund businesses of any size, it’s important to verify their expertise and capabilities in handling companies similar to yours. Some factors have a preferred range, such as funding opportunities from $50,000 to $700,000. Therefore, it is advisable to directly ask the factor about the size of companies they typically work with to ensure they can effectively meet your needs.


Get Started Now

Secure the funds you need today. Complete the form or call.

Factoring Offers Service Providers Far More Than Access to Cash

When you choose factoring for service providers, you are choosing a complete business support system that goes above and beyond rejuvenating your working capital. Other important benefits of factoring services include:

Competitive rates: Factor Finders offers industry-low factoring rates to our service providers. You may qualify for rates as low as 1.59 percent for your service invoices!

Fast approval: Unlike the lengthy qualification process for a conventional loan, you can begin factoring in as little as 3 to 5 business days!

Approval with poor credit: Factoring for service providers is designed to support startup businesses and rehabilitate struggling ones. We base our funding decisions on your clients’ creditworthiness instead of your own, so you can be approved even if your credit score is less than ideal.

Same-day funding: Once you begin factoring, you have the opportunity to receive same-day transfers of your factored cash. Your factor may also offer next-day transfers for a lower fee.

Unlimited funding potential: Your factoring ability is based on your invoice volume – the more work you do, the more money you can receive! Our account managers can offer customized service provider factoring packages ranging anywhere from $5,000 to $10 million!

Credit building: Use the cash you receive however you need to keep your business running steadily. Cover day to day expenses or pay down old debt to improve your credit rating for future financing needs.

Greater control over operating costs: With no up-front costs and a standard fee, you can easily account for the cost of factoring on your balance sheet. You have the flexibility to fund as much as you need to maintain your cash flow, so you can control your costs by only submitting invoices when you need.

In addition, with easy access to working capital you can negotiate discounts and early payment incentives with your creditors. Your factoring company’s complimentary credit checking and collections services will also save you time and money that you can focus on other areas of your business.

Are you ready to start factoring?

Call us for more information: (216) 292-5660

All You Need to Begin Factoring

A short application

A current accounts receivable aging report

A list of customers/invoices you’d like to factor

Articles of Incorporation, Articles of Organization or DBA filing

Service Provider Factoring is an Option in Any Service Industry

As long as you provide professional services to other businesses, you can factor those invoices for immediate cash. Factor Finders’ funding partners offer factoring for service providers in a number of practices:

This is just a short list of the professions we serve. If you provide services not covered here, contact us to learn more about factoring service invoices in your field!

Are You Ready?

Stop waiting on slow-paying customers, get your cash now!

Get Started Now

Secure the funds you need today.