Invoice factoring is the basic practice of selling invoices to financial factoring companies for the purpose of receiving money right away. Smaller companies often fall into the financial trap of not having available resources and therefore sell their invoices to financial agencies in order to gain working capital. This practice does not require the business to swallow more debt and in fact operates in an opposite manner. Small businesses that don’t utilize the financial tool of accounts receivable factoring acquire more debt by waiting for the accounts receivables to be paid.

Invoice factoring is typically used as a measure to avoid falling further into debt. Without this effective financial management tool many businesses have to adopt more loans or alternatively, put up more collateral for existing loans. Invoice factoring is available at a minimal fee, which makes it an attractive substitute to assuming more debt. In fact, accounts receivable factoring fees are usually set up by way of discount and these rates differ from individual company to company. The great advantage to this type of liquidation is that there are no interest fees to pay and the result is most often better profit margins.

There are many financial companies that offer invoice factoring services. The individual agencies will set up a company with the right set of accounts receivable factoring parameters. After the professionals from the invoice factoring agency assess the individual situation, they will set up the receivables to be factored and proceed accordingly.

Financial agencies that offer accounts receivable factoring are located worldwide and support every industry under the sun. Even truck drivers can sell their invoices to an invoice factoring financial service to free up capital fast. One of the most attractive aspects to an accounts receivable factoring agency is that they customize the service to each business’s individual requirements.

There are as many different types of invoice factoring agencies, as they are rates for factoring invoices. Some purchase the invoices no matter what the receivable total is and some accounts receivable factoring agencies will only liquidate invoices that accumulate more than $100, 000. Generally the higher the invoice factoring total is, the lower the rates will be to take advantage of this financial escape. In cases where the total is in excess of a hundred thousand, a solid accounts receivable factoring agency will offer rates that can be as low as two per cent!

There are many different types of invoice factoring agencies. For example, some agencies will only serve those businesses in the medical profession while others only serve purchase order factoring. There are some accounts receivable factoring agencies that are specifically designed to cater to small business and offer many great advantages that a larger agency wouldn’t necessarily offer. Despite the type of invoice factoring agency that is required for every individual business need, accounts receivable factoring typically happens within a 24 hour time period.



Thanks to Troy Degarnham for contributing this article to our Factoring blog:

Instant Working Capital

If you run your own trucking business, then you might be painfully aware of the fact that a lot of cash is required on a daily basis to pay fuel bills, drivers’ salaries, routine maintenance and repair bills and your other employees’ salaries. Since most of your clients could be paying you after a period of 30 days, meeting these routine expenses could pose a serious challenge to the growth and survival of your trucking company.

In such a case, you might wish for money in your hand, whenever you need to pay for your routine and even unexpected expenses, such as sudden repair bills or tire replacement bills. You could apply for a bank loan, in order to take care of such expenses. But, if you have just entered the trucking business, then banks would impose restrictions in the form of collateral or guarantors, in order to secure themselves against a bad loan. You might also need to provide your audited financial statements for the previous 3 years showing your profit figures, which would not be possible, if you were new to this line. You would have to repay the loan along with interest in the form of regular monthly installments for a fixed time, failing which the bank could take possession of the collateral offered by you, while availing the loan.

This unique need has created a financial tool known as freight factoring. Freight factoring companies offer you immediate cash against your credit invoices after deducting a factoring fee. They purchase your credit invoice and wire you the invoice amount after deducting a factoring fee of around 1.5% to 5%. This fee will be based upon the business that you generate for your factoring company, the number of days that you have extended to your credit clients and the credit rating in the eyes of your factoring company.

The factoring company might also retain another 5% to 10% of the invoice amount as security, although this would depend on the arrangement that you have with your factoring company. This means that instead of a fixed amount, you can get varied amounts at regular intervals depending on the amount of invoices that you have factored with the company. Thus, as your business grows, you might submit larger invoices to the factoring company, which in turn will provide fatter funds for your business.

Freight factoring will first and foremost help your trucking company by providing instant money without going through the hassles of providing collateral or audited documents. This money will immediately improve your cash flow and enable you to clear your daily bills such as fuel bills, drivers’ and other employees’ salaries, truck servicing and other repair bills, etc. Freight factoring will also enable you to take on new hauls, which previously would have seemed impossible due to shortage of funds. Freight factoring companies can also take over your receivables by collecting your payments from your clients on the due date, albeit at an additional fee. This too will enable you to divert your energy towards increasing sales rather than running after erring clients.

Thus, freight factoring can walk hand-in-hand with your trucking business and the money that is provided by such companies can help you to meet your expenses, take on new clients and larger hauls and even plan an expansion. Flexibility is the key in freight factoring and once you avail the services of the right factoring company, your trucking business might easily reach from point ‘A’ to point ‘B’ without any hiccups.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Business Capital Financing

To be successful in your start-up venture, growth of your business is the major issue to be focused on. For ensuring steep growth of your business, a streaming cash flow is a must for meeting the daily operational cost of your business. Any start-up business has to depend on loans for revenue generation, but it is very difficult or almost next to impossible to secure loans from banks and other financial institutions. So start up firms have to look for other options to save themselves from closing down due to lack of capital. Factoring is one of the options that offer the much-needed fuel to the engine of your business for its smooth functioning. So lets take a look at why and how start up companies can use factoring to keep the cash flow pumping into the business.

For most start-up businesses, the influx of revenue is conditional to customer’s payments. In the business world, providing service or products on credit is a norm. Usually, the business house renders a service or delivers a product to a client and then bills him. This bill is known as an invoice and since the payment of this invoice is held up for a period of thirty to sixty days or even more. This invoice becomes your account receivable, as you are bound to get the payment but not immediately. However, with factoring you can sell off your receivables and get immediate capital to settle your bills, payroll to employees, rents and taxes etc. this minimizes the waiting period that start ups have to endure before receiving the payment.

Factoring is a very simple and fast process and most firms offer their services to all types of small business including start-ups. For these kinds of businesses factoring proves to be a boon. Most factoring companies charge nil or minimal processing fee for their factoring programs. Additionally factoring is a financial tool that is directly bound with the sales of the business house. As with the increase in your sale, the cash coming in also increases, since typically the factoring firm pays about 70% to 90% of the total face value of your invoices. The factoring company also takes up the responsibility of collection from your customer. The remaining amount is cleared as and when the customer pays the amount. This enables you to concentrate on business development activities.

Business factoring is beneficial as, a business house can avail factoring as an option as soon as it generates profits. The moment the first invoice is generated, factoring firms could buy out your invoice and release your funds. Business factoring can be used by start-ups as its helps in building their credit ratings. With adequate cash flow new business have the advantage to pay their merchandisers on time, which in turn can help to avail discounts for prompt payments. Factoring is not a loan, as it does not require any collateral, thus you are not under a debt. This makes a positive impact on your balance sheet and helps get other types of funding as well.

Factoring is one of the best methods that can be used by start-up business to improve their cash flow. So if a start up has sufficient receivables and a good sales margin, it can definitely go in for business factoring.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Invoice Discounting

Business factoring is also known as invoice discounting, debt factoring, receivables factoring, among others albeit with a few small alterations. This is a very helpful financial tool for fast growing companies that have many credit clients in the pipeline, but not enough ready cash to service them effectively and meet business expenses effectively.

If you have many credit clients and are supplying products to them on a 30 or 60 days credit basis, then once you have dispatched your invoice, you would then have to wait for 30 or 60 agonizing days, until your payment becomes due. This effectively locks your own money and you might find that although your sales figures look impressive, your cash position might still be pathetic.

A business factoring company can then step in and save the day. These companies will ‘buy’ your credit invoices and in return will transfer the invoice amount into your account within a couple of working days. They will however, retain their factoring fee that could be anywhere in between 1.5% to 5% of the invoice amount based on a few conditions. This fee will be decided once the business factoring company checks the credit rating of your client, checks the number of days that you have provided as credit to your client and also checks the entire amount of business that you can provide to the factoring company.

The factoring company might also hold on to another 5% to 10% of the invoice amount, until the client pays the invoice amount on the due date. This money might get locked up, in case the client does not pay the invoice amount due to any disagreement. The factoring company might offer you the option of recourse or non-recourse factoring, which basically means that they could also take over the risk of collecting the payments from your clients at an additional charge. This means that even if your client fails to pay the factoring company on or after the due date, you will still not be at risk.

Business factoring can thus improve your cash flow dramatically and this will help you in meeting your business expenses, such as paying your suppliers and employees, and can even help in funding your business expansion plans. You can also buy your products in bulk by taking advantage of quantity or cash discounts. Business factoring ensures that you do not have to wait for the due date to approach to collect your payments, but instead can receive the money as soon as you submit the invoices to your factoring company.

If the factoring company has taken over your receivables, then you will need to inform your clients about your decision and you can then redirect your collection staff and your efforts towards increasing your sales figures. Once you talk to a business factoring company of your intention to tie-up with them, it normally takes around a week to verify the various facts and start the factoring process.

Thus, business factoring can improve your cash flow and also take on your collection hassles, thus becoming an extension of your business. By tying up with the right factoring company, you can both grow together, as your business increases along with the value of your invoices presented to them. Being highly flexible and practical, this method of financing can help you to maintain or increase your growth level, while enabling you to meet your expenses comfortably.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Factoring Tips

Factoring is basically a financial tool that aids you to get immediate money against your credit sales so that you do not need to wait too long before it matures. Factoring has been a part of the business sector for hundreds of years and has acquired a new shape with the changing needs.

Factoring allows any business to meet its capital needs. In the process of factoring, an invoice of a company is utilized by the factoring company as a security against which it provides a loan to that particular company. Cash is made instantly accessible by a factoring company, which in normal circumstances, would take months to recover. The factoring company disburses the cash immediately against the invoice, which is kept as security.

Truck factoring is the process in which truck factoring invoice firms purchase invoices only from the trucking and transportation firms. The cash that these trucking firms, big or small, get from factoring companies helps them to regulate their work with a smooth cash flow. In the trucking companies, cash comes only after a stipulated time of 60-90 days. In this scenario, factoring comes as a welcome respite to these companies where deficit of cash might hinder the smooth working of the firm.

Definitely, a fee charged by these factoring companies which varies from 1.5% to 7% depending upon the volume of invoices factored and time taken for the same invoices to get cleared. This might seem a high fee but when one looks at the larger picture then the benefits one gets, in terms of cash flow and saved time and energy, is very reasonable.

The main benefit of factoring invoices is that the company gets the much-needed cash flow to run the business smoothly. This is done after the negotiation of the fee of factoring firm is decided and both parties have agreed upon a final rate. Once finalized, the factoring company pays around 60-90% of the invoice as advance, decided earlier. Thus, the other firm gets its cash in hand.

When a firm starts factoring its invoices it saves not only on time but also on the number of employees who can then be directed towards other important jobs rather than employing them to extract dues from clients.

As trucking firms have ready money it also boosts their buying or procuring power, enabling them to make better deals. They are also able to get benefits of bulk procurement discounts. Ready cash flow also helps in expansion through marketing and production and subsequently increasing sales. This comes as an overall boon for the firm that has chosen factoring for its freight bills.

A very big benefit of factoring freight bills is that it provides the company with a detailed and clean portfolio of its accounts receivable. Ready cash improves the financial statement and saves a company from falling into a debt trap. Moreover, there is no need to look back to traditional banks for any kind of financial assistance as the factoring companies provide the required amount of cash flow for the smooth expansion of business. This way the company is saved from paying the high interests rates charged by banks on loans.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Cash Flow Funding