Invoice Factoring Basics

Invoice Factoring Basics

Can’t afford to wait 30 to 60 days to get paid by your customers?

One of the biggest challenges for small and mid size business owners is having to wait 30 to 60 days to get paid for their invoices. This can be particularly challenging if the business is in growth mode and adding customers every day. Before you know it, the business has a lot of money tied up in “Accounts Receivable” but little cash in the bank to show for it.

Going to the bank for business financing won’t necessarily help. Why? First, bankers require stringent audited financials and lots of collateral. Second, most banks are retreating from the corporate loan market, making the remaining banks very choosey on who they do business with.

Is there a solution for this problem? Yes. It is called Invoice Factoring.

Invoice Factoring enables you to turn your slow paying invoices (from good customers) into immediate cash. An invoice is a promise to pay from a customer. And an accounts receivable factoring company specializes in purchasing this type of debt.

The factor, purchases your invoices providing you with advance funds immediately. They wait to be paid, while you get to use the immediate funds to grow your business.

Who qualifies for invoice factoring financing?

To qualify for factoring, you must:

  • Do business with commercial customers
  • Have a profit - or plan to have one soon
  • Have profit margins (or plan to have them) of 20% or more

How are invoice factoring rates determined?

The receivable factoring rates or discounts, are determined by the following factors:

  • Monthly volume
  • Quality of Account Debtors/Customers
  • Other risk parameters

Factoring rates can range from 1.5% to 3% a month depending on all these parameters.

Want an instant factoring quote? Get an online quote now! Questions? Call (866) 730 1922. Services in the USA and in Canada.

Invoice Factoring

Need more information? Go to the Factoring Resource Center or to the main invoice factoring page.

Next: Factoring invoices explained

Previous: What is invoice factoring?

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Last change 7/30/2008