When most people hear the term “factoring,” they immediately associate it with a mathematical practice. But did you know factoring is also an effective business financial solution that gives companies fast cash for their invoices?
Factoring is a relatively simple process that delivers the healthy cash flow you need to cover immediate business expenses and keep your business running. Though the term “factoring” is not quite as well known as “bank loan,” thousands of people are finding it to be exactly what their company needs to take their business to the next level.
Factoring is a financial transaction where a business sells a third party, called a factor, their accounts receivable. The factor advances a large percentage of the invoice amount to the client, usually within 24 hours. By factoring, a business can:
1. Avoid having to wait 30, 60, or even 90 days to get paid on an invoice
2. Quickly access their working capital
3. Gain the cash they need to cover immediate business expenses
4. Accelerate business growth and gain more customers
If you’re a business owner, you know how tough it can be to lack the cash you need to keep your business running. A smart alternative to a bank loan, invoice factoring can provide quick access to crucial working capital without adding debt.
Factoring works like this:
1. You send your invoice to the factoring company
2. The factoring company pays a large portion of that invoice to you quickly, while keeping a small percentage in a reserve account
3. The customer sends the invoice amount to the factoring company
4. You receive the rest of the invoice amount that was in the reserve account, minus a small pre-negotiated factoring fee
Now that you know what factoring is, do you think it’s the financial solution your business needs? Chat with one of our friendly factoring consultants at (800) 705-1500 to learn more about factoring and how it can meet your business’ financial needs.