Invoice Factoring Services: Everything to Know
Invoice factoring services are alternate financing solutions for small businesses. The process involves an invoice factoring company issuing a cash advance for your company’s unpaid invoices within 24 hours. This is beneficial for businesses because it bridges the gap between payment periods, instead of waiting 30, 45, 60+ days for customers to pay.
Unlike a loan, however, the factoring company buys your invoice to quickly provide the cash you need. Therefore, no debt is established. You get paid instantly and your customer pays the factoring company by sending payment to their address or lock box. It’s simply a way to get paid faster for the products and/or services you’ve provided. The factoring process is simple, learn more.
Factoring can be used as either a short-term or long-term financing option. Some businesses prefer to use it short-term in order to get through seasonal cash flow ups and downs. Others may factor invoices over a longer period, especially if they have a few regular clients who pay on extended terms.
Ready to get funding? Contact us today and we can get you set up.
Is Invoice Financing Right for Your Small Business?
The following scenarios are common problems that company’s face and the factoring company steps in to help.
Your company is growing quickly and you don’t have immediate working capital to keep up with demand
Factoring provides the steady funding necessary to take on larger clients, hire more employees and cover all your expenses as they arise. By working with a factoring company, you can transform your cash flow and take your business to the next level. If you’ve ever had to turn down an opportunity due inadequate cash flow, factoring might be right for you.
Waiting for customers to pay is really stressing you out
Sometimes you can’t afford to wait. Payroll is due and the bills are piling up. Customer collections can drain your energy and take you away from more important matters. Factoring offers a steady source of cash flow – giving you peace of mind that your business will continue to thrive.
You’ve recently started up and don’t qualify for a bank loan
Invoice factoring companies fund both startups and long-established businesses. If your company doesn’t qualify for a bank loan yet, or if you simply want a quick infusion of cash without incurring debt, a factoring company can help. Find out more about factoring for startup companies.
You need cash now – as in this week
Invoice finance is the perfect solution to solve your immediate cash flow concerns. Whether you need funding for payroll or other expenses, factoring is a reliable way to infuse your small business with fast cash flow.
You want flexibility
Factoring invoices is growing in popularity, and it’s easy to see why. Not only does it provide cash within 24 hours, it offers unparalleled flexibility. There are no minimums or maximums for funding. Factor invoices when you want, how you want, whom you want and for however long you want.
Your credit isn’t perfect
A stellar credit history is NOT required for approval. You can qualify for factoring with a not-so-great credit score.
Invoice Factoring Services to Fit Your Business
Factor Finders, LLC provides comprehensive invoice financing solutions for any small business in need of more working capital. Our competitive invoice factoring services are designed to support all types of businesses (B2B and B2G), ranging from start-ups to larger companies.
Slow-paying customers can hurt small companies that rely on consistent cash flow. When money is held up in unpaid invoices, other operations such as funding payroll, hiring new employees, paying taxes, accounting, and expanding marketing efforts are often placed on hold. That’s where factoring invoices can help. Invoice factoring (also known as accounts receivable factoring) enables small business owners to secure the cash flow necessary for continued growth.
How to Qualify for Factoring
First and foremost, invoice financing works for businesses that provide services and/or products to other businesses (including government contracts). Factoring does not work for most business-to-consumer sales transactions. If you’re billing consumers, an unsecured loan or merchant cash advance is a better option.
Invoice financing is a straightforward process. Approval is mainly based on the creditworthiness of your clients, since they’re the ones responsible for paying the invoice. Invoices must not be pledged to another entity as collateral. The invoice should be payable within 90 days, but sometimes exceptions are made depending on the industry. There is no minimum credit score required and start-up companies are easily approved. Getting started with invoice factoring is easy.
Invoice Factoring Rates: What to Expect
So, how much of an upfront advance will factoring provide? Advances vary by industry, but the average business owner can anticipate an advance of 80% to 95% of the invoice amount. If you submit an invoice for $3,000, for example, you can expect an advance of $2,400 to $2,850. Rates are based on a variety of factors. Check out this article about how factoring rates are calculated.
You receive the advance and the remainder is placed into a reserve account. The reserve is released when your client pays the factor, minus a small fee for the factoring service.
Invoice factoring rates depend on a number of things, including your industry (staffing, trucking, construction, etc.). The best way to find out what your rates will be is to get a quote.
What collateral is required for invoice factoring?
When factoring invoices, the collateral required is solely your invoices or accounts receivable. No other assets or forms of security are necessary.
Who handles bad debt in factoring invoices?
In the realm of factoring invoices, the responsibility of handling bad debt differs from that of traditional finance companies. While finance companies typically do not deal with bad debt directly, factoring companies have measures in place to minimize the impact of such situations. It is important to note that factoring companies are distinct from collection agencies and do not operate in the same manner. In the event that an invoice remains unpaid, factoring companies do not assume the role of a collection agency. Instead, the responsibility of dealing with bad debt falls back to your company, enabling you to assign it to an attorney or a collections company for further resolution.
How does the line of credit increase in factoring invoices?
The line of credit in factoring invoices can be increased as necessary, taking into account your invoice balance. This means that as your invoices increase and the creditworthiness of your clients remains satisfactory, your line of credit can easily expand. This unique feature of invoice factoring makes it an ideal financing solution for companies going through a period of rapid growth, as it ensures that your financing keeps pace with the level of expansion you are experiencing.
Put Our Factoring Services to Work for Your Company
We’ll help your business secure the funding necessary to grow and take on new opportunities.
Why Do Businesses Factor Their Invoices?
Working with the right factoring company can help your business reach its full potential. Take advantage of one of the most flexible solutions to fund your business:
- Funds within 24 hours
- Easy approval
- No long term contract required
- No hidden fees
- No minimum volumes
- You decide which invoices to factor, when you need to factor
What could you do with more money? Securing cash for your company shouldn’t be a pipe dream. Count on us to get you funded.
- Cover payroll, taxes and other expenses
- Purchase supplies and upgrade technology
- Accept larger contracts from companies that require longer payment terms
- Expand marketing efforts
- Hire more employees & attract top talent
- Take advantage of incentives for paying vendors early
About Our Invoice Financing Services
Recourse and non-recourse services: Two types of factoring services are available: recourse and non-recourse. With recourse, should a customer fail to pay their invoice after a certain amount of time, you will be required to pay back the advance, and the factoring agency will not be held liable for non-payment.
In non-recourse funding, the factoring agency assumes the credit risk for any unpaid invoices, so you are not held responsible for outstanding payments. Since non-recourse factoring is less risky for you, it tends to have slightly higher factoring fees than recourse. If you have questions about which type of invoice financing is best for your business, we’re here to help!
Notification and non-notification factoring: Not 100% comfortable with letting your customers know that you’re using a factoring company? We understand. Our account managers are experts at handling these types of situations, and will happily work out a solution that you feel confident about.
Flexibility: How much you factor and when is entirely up to you and what you think is best for your company. Invoice factoring is designed to grow with your business, so as you expand, so does your capacity to receive more funds!