Factoring (Factoring Companies)

Factoring (Factoring Companies)

Facing a problem because your clients pay in 30 to 60 days? Need to get paid sooner? Most new and growing businesses can’t afford to wait up 60 days to get paid. There are supplier and payroll commitments that must be met. But often, securing the funds to meet these obligations is difficult.

Factoring can provide you with the funds to pay employees and suppliers. It provides predictable cash flow, helping you manage and grow your company. It can benefit you if:

  • Your are growing quickly
  • You have been close to missing payroll
  • You have delayed paying critical suppliers
  • Your clients take up to 60 days to pay their invoices

HOW DOES FACTORING WORK?

Factoring provides you an advance on your invoices, giving you the funds to cover business expenses. The financing transaction is settled once your client pays. It works like this:

  1. You deliver product or service to your client
  2. You generate an invoice
  3. The factoring company advances you 80% of the invoice. The remaining 20% is held in reserve.
  4. Note that certain industries can qualify for higher advances
  5. Once your client pays the invoice, you get the remaining 20% , less a small financing fee.

HOW DOES FACTORING BENEFIT YOU?

There are number of benefits to factoring your invoices. They include:

  • Increased liquidity and streamlined cash flow
  • Flexible financing that grows directly with your sales
  • Quick turnaround times
  • Factoring is easy to obtain. Since the factoring company uses your invoices as collateral, the most important prerequisite is that you do business with reliable and reputable customers. It is ideal for startups and growing companies that can’t obtain bank financing.
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