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Factoring: Here’s How to Get Started

Factoring Your Accounts Receivables

As business owners, finding the capital to keep moving could be a problem. Invoice factoring is a fast & simple way to fund your growing business. The straightforward application process makes it easy to secure the working capital you need.

To start, you’ll need to find the right factoring company for your business based on your size, location and industry. That’s where we come in. We’ll connect your business with a factor that can meet all your needs.

Next, the factoring company will ask you to complete a one-page application. The application is very straightforward and asks for basic company information, like name and address, as well as who your largest customer is, for example.

Once you’ve finished the application, the following documents may be requested by the factoring company:

  • Accounts Receivable Aging Report
  • Copy of Articles of Incorporation
  • Customer List
  • Invoices to Factor

Once the factor receives the application and documentation, you’ll likely be approved in as soon as 24 hours.

Factoring for Easy Access to Cash

Factoring offers a streamlined and convenient way to access cash quickly. By selling your unpaid invoices, you can unlock the working capital that would otherwise be tied up in accounts receivable. Unlike traditional lending facilities that may have strict qualification requirements, factoring companies are more lenient. They focus on the customers’ ability to pay on time rather than the business owner’s creditworthiness. This means that even businesses with less-than-perfect credit can benefit from freight factoring and access the cash flow they need without being restricted by traditional banks.

Recourse vs Non-Recourse Factoring

Non-recourse factoring is a financial arrangement that differs from full recourse factoring in terms of the liability of the business seeking factoring services. In full recourse factoring, the business remains responsible for repayment of invoices in the event of non-payment by their customers.

However, in non-recourse factoring, the business is not obligated to repay the factoring company if there is a qualified reason for non-payment. When it comes to the overall process, both non-recourse and full recourse factoring operate in a similar manner. They involve the sale of invoices to a factoring company, which provides immediate cash flow to the business. In case of disputed invoices, both types of factoring typically have provisions for addressing payment issues. The key difference lies in the liability of the business for repayment.

In full recourse factoring, regardless of the reason for non-payment, the business is responsible for repaying the invoice amount to the factoring company. This means that if a customer fails to pay due to bankruptcy or any other reason, the business is liable to repay the outstanding invoice amount. However, in non-recourse factoring, the business is not required to repay the factoring company if there is a qualified reason for non-payment. For instance, if the customer becomes bankrupt or insolvent, the business is relieved of the obligation to repay the invoice amount. This reduces the potential risk and financial burden on the business.

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How to Start Factoring: The Process Explained

1. Complete the application process
First, you’ll get your account setup. After submitting a one-page application and a few simple documents, you’ll typically be approved 1-2 days. Call 216-292-5660 to get started now.

2. Submit invoices to factor
Now you’re approved and ready to send your invoices to the factor. The factor will verify the invoices and advance you the cash, usually within 24 hours. Advance rates vary by industry, but you can expect advances up to 95%. The remainder is held in a reserve account until payment is collected from your customers.

3. The factor collects from your customers
Your customers pay the invoice on the terms you already have in place with them.

4. The factor releases the reserve
Once your customers pay the invoice, the reserve amount is released back to you, minus a small factoring fee.

The Factor Finders Difference

Factor Finders offers customized financial solutions for businesses experiencing fast growth, managing seasonal sales patterns, or dealing with slow paying customers. We act as a broker and can set you up with a factoring company that specifically suits your needs. Invoice factoring is the ideal solution for firms lacking enough credit or history to obtain a bank loan. Funding decisions are based on your customer’s credit worthiness, so a less-than-perfect credit history is OK. You will be able to obtain funding debt free! We’re committed to helping your business secure the funding you need to grow.

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