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What is Factoring

Factoring turns unpaid invoices into immediate cash.

How factoring works
  • 2
    Send Invoices

    Email or fax your invoices along with some basic documentation showing the work was completed.

  • 3
    Get Cash

    We advance up to 90% of the invoice amount in 24 hours. Get the remaining 10% once your customer pays (minus a small fee).

Yes, absolutely. Factoring, also known as accounts receivable financing, is a widely
accepted method of alternative financing that eliminates the wait and worry of collecting payment from customers. In addition, factoring is a $150 billion dollar industry and thousands of companies factor invoices each year.

Many businesses find that getting immediate access to cash that would otherwise take weeks or months to arrive greatly outweighs the small fee a reputable factoring company will charge. In fact, businesses often turn to eCapital to help manage receivables administration and debt collection. It frees them to focus on running their business and gives them the cash flow required to pay expenses, hire workers, and invest in equipment.

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The Benefits of Factoring

Why would a company want to factor their invoices? Lots of reasons. Here are six:

Fast cash.

In most cases, you get access to cash within 24 hours. Use the money to pay bills, hire more workers or drivers and fund growth. Plus take advantage of early payment discounts and bulk discounts from suppliers.

Doesn't create debt.

Let’s be clear: Factoring is not a loan. This is money you already earned. You simply pay a small fee to get access to it sooner.

Relieves stress.

Waiting to get paid is stressful, especially with bills to pay. A factoring firm will pay you quickly and collect on your behalf, eliminating the wait and worry. 

Opens doors.

If you want to expand your business, you need cash flow. Factoring puts money in your pocket to add staff, fund expansion, or take on more work. 

It’s flexible.

With eCapital, you have the freedom to factor on your terms. You decide when you want to factor and who you want factor. Start or stop at any time. 

Good for growth.

Factoring is the only source of business financing that automatically grows with your sales. More sales mean additional invoices and more cash—immediately available to fund your growth.

Bank Loans vs. Factoring

Before you go to a bank to get a loan or a line of credit, consider the advantages of factoring. 

Bank Loans

  • Difficult application process
  • Takes weeks or months for approval
  • Collateral typically required in the form of fixed assets
  • Creates a debt which weakens your balance sheet
  • Startups generally don’t qualify
  • Interest paid monthly
  • You are responsible for credit, collections and receivables management

Factoring

  • Simple, streamlined application
  • Approval in hours or days
  • Business receivables serve as your collateral
  • No debt created—balance sheet enhanced by inflow of cash
  • Startups welcome
  • No monthly interest
  • Services handled by the factoring company at no extra charge

The first question you might be asking yourself is how much does factoring cost? Determining your rate is quite straightforward. All factoring companies use a few basic criteria to calculate the rate:

  •       Total dollar volume you factor each month
  •       Average invoice amount
  •       Payment period by your customers (how long it takes your customer to pay)
  •       Diversity of your customer base (referred to as “concentration”)
  •       Your industry

Based on these criteria, rates are typically 1%-5% of the amount invoiced. The benefits of receiving immediate cash typically far outweigh the fee. So what are you waiting for? Call today and let’s get started.

Factoring Scenario
Get the FREE GUIDE to Quick Cash through Invoice Factoring
Learn industry-leading tips in this 11 page eBook on
alternative financing, including:
    • Factoring and why it works
    • What to look for in a factoring company
    • How to utilize factoring services to grow your business

 

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