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Top 10 Most Frequently Asked Questions Regarding Invoice Factoring

Last Modified : Feb 07, 2024

Fact-checked by: Bruce Sayer

Invoice factoring is simply a cash flow solution that turns invoices into quick cash without adding any additional debt. Common in several industries, invoice factoring allows companies to use the cash to pay for upfront costs, rather than waiting 30, 60, or even 90 days for a payment. Many companies rely on factoring to access the working capital they need to grow their business.

So how does invoice factoring work and how can you get started?

Below is a list of the top 10 frequently asked questions regarding invoice factoring:

1. Will factoring hurt my company’s credit score?

No. Since invoice factoring does not make your company incur any debt, factoring will not hurt your credit score.

2. Can I factor past due invoices?

Most companies allow you to factor invoices up to 30 days old.

3. How are funds transferred to my business?

In most cases, you can get funds wired to your company bank account, get an electronic payment through ACH, get an express code, or receive a check by mail.

4. Does invoice factoring require personal guarantees?

Unlike traditional bank loans, invoice factoring does not require personal guarantees.

5. How will my customers know where to send their payments?

Your customers will be notified to pay the factoring company directly. Typically, they will receive a copy of the invoice clearly stamped with information about where to send the payment.

6. Do factoring companies contact my company’s customers?

Yes, usually through a one-time mailed notification alerting the customer to send payments to the factoring company. Factoring companies understand the importance of maintaining business relationships, and will professionally handle all communications with your customer.

7. What happens if a customer sends a payment to my company instead of my factoring company?

The funds should be immediately forwarded to the factoring company.

8. Can my start-up qualify for factoring services?

Absolutely! Because factoring focuses on the credit of your customers, it is a great way for a start-up business to grow their working capital.

9. Will my customers think my business is struggling if I factor?

Factoring is an accepted form of financing in the business world. When a company factors, it will put them in a stronger financial position, which helps build trust in your business.

10. How is factoring different from a bank loan?

The approval process for invoice factoring is quite simple, as compared to the lengthy approval processes often associated with bank loans. Also, unlike a bank loan, factoring does not create debt.

Have additional questions? Feel free to call us at (800) 705-1500. Continue to check back on our blog for more factoring tips!

ABOUT eCapital

Since 2006, eCapital has been on a mission to change the way small to medium sized businesses access the funding they need to reach their goals. We know that to survive and thrive, businesses need financial flexibility to quickly respond to challenges and take advantage of opportunities, all in real time. Companies today need innovation guided by experience to unlock the potential of their assets to give better, faster access to the capital they require.

We’ve answered the call and have built a team of over 600 experts in asset evaluation, batch processing, customer support and fintech solutions. Together, we have created a funding model that features rapid approvals and processing, 24/7 access to funds and the freedom to use the money wherever and whenever it’s needed. This is the future of business funding, and it’s available today, at eCapital.

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eCapital Corp. is committed to supporting small and middle-market companies in the United States, Canada, and the UK by accelerating their access to capital through financial solutions like invoice factoring, factoring lines of credit, asset-based lending and equipment refinancing. Headquartered in Miami, Florida, eCapital is an innovative leader in providing flexible, customized cash flow to businesses. For more information about eCapital, visit eCapital.com.

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