This will verify their ability to pay, influence their credit limit, and reassure you that you are working with reputable companies. Another free service invoice factoring companies offer is collection assistance — while you focus on other areas of your business, the factor will follow up with your customers to receive and process payment.
Simply having cash on hand to pay your expenses on time will help you maintain your credit rating. Selling AR can benefit your company in unexpected ways. Not only can you choose which accounts to factor and when you want to submit invoices, you can also control the length of your factoring relationship! Factor Finders has expert account managers ready to handle the intricacies and unique needs of nearly every industry. As long as you are selling to commercial clients and your invoices are assignable that is, unpledged to another party , they are eligible for factoring!
Some of the industries we serve include:. Articles of Incorporation Current customer list and aging report Completed application Any invoices you wish to factor.
Talk to Us: Free Quote. Talk to us! Selling Accounts Receivable. Factoring means that someone will buy your accounts receivable often shortened to "receivables" and they will do the collecting. You can sell all or some of your receivables to the factor or you can sell individual invoices directly. According to Investopedia, the factor will typically give you 70 to 90 percent of the value of outstanding invoices.
They may also charge a fee for each invoice or each account. Factoring companies are legitimate businesses. They make their money by knowing the value of receivables and being good at collecting on them. The buyer obviously cannot give you full value on your receivables, because they don't know whether they will be able to collect and because it will take a good deal of time and money for them to check credit on all your customers and to run the collections process.
Factoring companies pay based on 1 the length of time the receivables have been outstanding, 2 , the number of receivables, and 3 the credit ratings of your customers. The factor will review your receivables and give you an initial amount within a few days. With the initial discount on the purchase of your receivables and the fees, you will probably get no more than 40 percent of your receivables. That's just an estimate; your costs might be different.
If you need cash and you have many receivables, another possibility might be a working capital loan or a business credit line. The bank may be willing to take your receivables as collateral. The interest rate on this type of loan should be lower than the cost of selling to a factor. The factoring company wants to treat your customers well, for three reasons:.
The biggest problem many organizations face today is not being able to get cash flow quickly enough to pay for expenses. Selling your account receivables to factoring companies may be a viable solution to quickly get the money you need.
Consider factoring when you need reliable and growing access to short-term working capital. Typical factoring clients have previously been declined credit by a bank and have one or more of the following characteristics:. Selling accounts receivables helps them cover temporary cash flow needs while they wait for their customers to pay. Typical uses include inventory purchases, payroll funding, capital expenditures, and the payment of vendors and other miscellaneous expenses.
Factoring offers several advantages to well-established and also to small businesses; here are a few of them:. Selling account receivables is a very simple and straightforward process.
Accounts receivable factoring is a value-added service and you should not choose your factor based on cost alone.
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