Working with a factoring company
May 25, 2009 by Accounts Receivable Factoring
Filed under About Factoring
If your business is need of some quick funding, and you extend credit to or invoice your clients for services rendered or products delivered, then you should consider business factoring.
Factoring, also known as invoice factoring, is a funding option that can quickly provide businesses with money needed for reasons such as meeting payroll, purchasing inventory, or a quick boost in working capital in order to have some extra cash on hand.
Factoring is a great way for small or large businesses to get fast funding. The process of factoring is relatively easy and straightforward. You start by compiling invoices that you want funded, and submitting them to a factoring business. Once the factor receives your invoices, you clients will be checked for credit worthiness and payment history. Your invoices will then be looked over to make sure that they have been completed correctly. Once everything checks out, a notice will be sent to your clients directing them to pay the remainder of their balance to the factor rather than your business.
It usually takes two to five days to receive your initial payment from a factor, which will be anywhere from 70% to 90% of your accounts receivable. If you use an online service, you may be able to receive your money in as little 24 hours. Factors will either deposit the money directly into your bank account, or, they will cut you a paper check.
Once a factoring company has collected from all of your clients, you will receive the remainder of your advance, minus the fee (also known as a discount rate) that the factor charges for their service, which will usually be 3% to 5%, depending on the factor. There are several different aspects of accounts receivable loans that can affect your discount rate, which include the type of business you have, your clients, the number of invoices you submit, you type of billing, and the type of factoring service you wish to have.
It is highly likely that you will have to sign a contract with your factor detailing service fees, payment timelines, and what will be held as collateral. It may be a good idea to have a lawyer look over this contract, especially if you are unfamiliar with factoring, or are unsure of the terms that have been outlined.
When choosing factoring as a business financing option, it may also be helpful to consider speaking with several factors in order to get factoring price quotes . And, remember that the factor will be representing your company, so you will want to choose a factor that can uphold that values of your company and provide good customer service.
Thanks to Lexie Wright for contributing this article to our Factoring blog:
Factoring, also known as invoice factoring, is a funding option that can quickly provide businesses with money needed for reasons such as meeting payroll, purchasing inventory, or a quick boost in working capital in order to have some extra cash on hand.
Factoring is a great way for small or large businesses to get fast funding. The process of factoring is relatively easy and straightforward. You start by compiling invoices that you want funded, and submitting them to a factoring business. Once the factor receives your invoices, you clients will be checked for credit worthiness and payment history. Your invoices will then be looked over to make sure that they have been completed correctly. Once everything checks out, a notice will be sent to your clients directing them to pay the remainder of their balance to the factor rather than your business.
It usually takes two to five days to receive your initial payment from a factor, which will be anywhere from 70% to 90% of your accounts receivable. If you use an online service, you may be able to receive your money in as little 24 hours. Factors will either deposit the money directly into your bank account, or, they will cut you a paper check.
Once a factoring company has collected from all of your clients, you will receive the remainder of your advance, minus the fee (also known as a discount rate) that the factor charges for their service, which will usually be 3% to 5%, depending on the factor. There are several different aspects of accounts receivable loans that can affect your discount rate, which include the type of business you have, your clients, the number of invoices you submit, you type of billing, and the type of factoring service you wish to have.
It is highly likely that you will have to sign a contract with your factor detailing service fees, payment timelines, and what will be held as collateral. It may be a good idea to have a lawyer look over this contract, especially if you are unfamiliar with factoring, or are unsure of the terms that have been outlined.
When choosing factoring as a business financing option, it may also be helpful to consider speaking with several factors in order to get factoring price quotes . And, remember that the factor will be representing your company, so you will want to choose a factor that can uphold that values of your company and provide good customer service.
Thanks to Lexie Wright for contributing this article to our Factoring blog:
