In this turbulent economy financing options for small businesses are very limited. Traditional financing through banks is difficult to obtain. Other secondary alternative sources such as micro lenders, credit unions, and economic agencies are available, but often take weeks to put into place. By factoring invoices or utilizing accounts receivable factoring, you can be approved quickly and have access to cash against your outstanding invoices within days. We can structure your financing to include all your invoices or selective ones that you choose to give you the working capital you need. Factoring can even be utilized while you are waiting for approval on other financing.
How can factoring invoices help my business?
By factoring invoices on your government and/or commercial contracts, you will receive funds on your invoices as they are issued, so you don’t have to wait 30, 60, 90 days to get paid. This increase in cash flow will enable your business to take on new and larger opportunities and sustain you through periods of growth. Our factoring services are readily available to newer businesses as well as long established businesses with the focus of credit on your customer, not yours. It can be put into place in 1-2 weeks.
Benefits of Factoring Invoices and Accounts Receivable Financing
Benefits of accounts receivable factoring include increased cash flow and improved working capital. Proceeds from factoring can be used for various reasons including payroll, taxes, marketing, vendor discounts, ongoing expenses, but are particularly beneficial when a company is in a growth stage and moving to the next level of success. Factoring can be used by a wide variety of industries including staffing, manufacturing, distribution, transportation, contractors, and more.
Quick Factoring Invoice Example
A company provides goods or services to its customer. Once an invoice is issued, it is “sold” to a factoring company (factor) who advances a percentage of the face value of the invoice. This advance (typically 70%-90%) is usually received within 24 hours of issuance. When the invoice is paid 30, 60, or 90 days later, the remaining balance is paid less a transaction fee for the use of the funds. The advance rates and fees are agreed upon by both parties prior to the initial funding. During the approval process, credit worthiness shifts from the business owner and company to its customers who are responsible for payment of the invoice.
Example of Transaction
Company ABC issues a $10,000.00 invoice to Company XYZ for goods delivered. Terms are net 30 days. On Day 1 when invoice is issued a copy is sent to the factor who verifies that goods have been delivered to XYZ and invoice will be paid according to terms. After this is done (usually same day or next day), 80% or $8,000.00 (depending on agreed upon advance rate) is paid to ABC. When the invoice is paid 30 days later by XYZ to the factor, the $2,000.00 balance is paid to ABC, less the transaction fee.