How to Start Accounts Receivable Factoring

Securing capital to keep moving is a problem for many business owners. Grow your business with invoice or accounts receivable factoring. The simple application process makes it fast and easy to obtain the working capital you need to expand your business. 

Steps to Take for Factoring 

The first step to take is finding the right factoring company for your business. This is typically based on business size, location and industry. This is where Factor Finders comes into play. We will match you with a factor from our large network to meet your needs. After a connection is made, you will be asked to complete a short application to provide information such as name, address and largest customer. Following the submission of the application, the factoring company may request additional documents. These include accounts receivable, aging report, copy of articles of incorporation, customer list and invoices to factor. After the factor receives the application and documentation, you will usually be approved in as little as 24 hours. Once you are approved, the factor will collect from your customers. When your customers pay the invoices, the factor releases the reserve amount back to you, minus a small factoring fee. 

Purpose of Accounts Receivable Factoring 

Factoring is a streamlined and convenient way to quickly access cash. When you sell your unpaid invoices, you unlock working capital that would otherwise be tied up in accounts receivable. Factoring companies are more lenient than stricter traditional lending facilities. Even if your business has less-than-perfect credit, you can still benefit from freight factoring and access the cash flow you need without the restrictions imposed by traditional banks. 

Recourse vs Non-Recourse Factoring 

Non-recourse factoring is a financial arrangement that is different from full recourse factoring in terms of the liability of the business seeking factoring services. With full recourse factoring, the business is responsible for repayment of invoices in the event of non-payment by their customers. In non-recourse factoring, the business is not obligated to repay the factoring company if there is a qualified reason for non-payment. When comparing the overall process, both non-recourse and full recourse factoring operate in a similar manner. They both involve the sale of invoices to a factoring company for immediate cash flow to the business. If there are disputed invoices, both types of factoring typically have provisions for addressing payment issues, but the key difference lies in the liability of the business for repayment. The business is responsible for repayment in full recourse factoring, even if the customer fails to pay due to bankruptcy or other reasons. A business is not required to repay the outstanding invoice if there is a qualified reason for non-payment with non-recourse factoring.