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:
Staffing Services Receivables Factoring
February 21, 2009 by Accounts Receivable Factoring
Filed under About Factoring
Is your staffing services company in need of short term cash flow? Staffing services companies, just like other businesses, go through various growth phases during their lifetime. Each business phase can require additional cash flow, and in some cases, the business may not have the cash on hand. This shortage can cause the business owner to seek financing options; however there can be challenges associated with trying to obtain financing quickly.
In the staffing services industry, there can be delays in the receipt of the compensation due to your company. As the clients that your business is working with are not paying their employees directly, your staffing services company is responsible for making payroll. While delays are a part of business operations, your staffing services company will still need to make payroll for your employees, and if these delays are substantial, it can cause your business to be in a short term cash crunch.
Lack of working capital is the largest cause of business failure, as small businesses can often simply not afford to bridge the gaps in cash flow if things don’t go as they have planned. Business owners can seek traditional methods of financing through their personal banker, through applying for personal loans or even cash advances from company credit cards to meet shortages. However, these options are not always available, they can take several weeks to fund and many business owners have already exhausted these options. Factoring is a viable financing option for staffing services companies to capitalize on their receivables for the much needed cash that their business needs quickly.
Understanding Staffing Services Receivables Factoring
In the staffing services industry, it is common to have a long list of accounts receivables owed, for the services that your company has provided. These accounts receivables are a valuable asset that you can leverage through the financing option of factoring. Factoring is not a business loan, but it is a cash advance on the business’s accounts receivable assets.
When you apply to establish a relationship with a factoring company, the acceptance of your company is not established based upon the company’s credit, but upon the credit of the companies that owe you money in the form of accounts receivable. The reason for this is that the factoring company is actually going to purchase your receivables from you at a discount. The company is therefore interested in the payment history of the companies that owe your staffing services company money.
The factoring company typically pays between 75-80% of the total invoices owed to you in advance, and then they take over the responsibility of collecting the full amount from the company that owes you. Once the factoring company collects upon the invoice, they will pay you the difference owed, minus any of their applicable fees.
Most factoring companies will charge a fee that is based upon the credit risk of the companies that owe your business money and the time frame that it takes the company to pay the invoice amount. If the company pays their invoice within 30 days, the fee that the factoring company will charge is often several percentage points less than if it takes 60-120 days for the company to pay your invoice. Average factoring fees will range from 1-6%, so be sure to evaluate all of your options prior to establishing a relationship with a factoring company.
How Does Factoring Benefit Staffing Services Companies?
Factoring benefits many different kinds of industries, particularly industries such as staffing services, that have a need for quick cash flow turn around time. One of the singled largest expenses for a staffing services company is its payroll. Outsourcing your team of employees to other companies is the fundamental basis of your business model, and why everything could be going smoothly, if a client takes longer than expected to pay their invoice to your company, you could be in a position where you are required to fund your payroll without the necessary financial resources. If this is the case, things can become challenging financially for your staffing services company quickly.
Factoring provides payroll funding options for staffing services companies who are in need of quick cash flow. When you have an invoice that you would like to receive quick funding on, you can submit it to the factoring company that you have established a relationship with. The factoring company will typically issue you the needed capital within 48 hours of the invoice being submitted. This payroll factoring will allow your company to receive capital quickly so that you can meet your financial obligations on time. Also, payroll factoring can allow you take job opportunities with larger companies that have a standard invoice payment practice that is longer than smaller companies. Overall, establishing a factoring relationship will provide your staffing services company the funding that it needs to remain viable and to expand.
Staffing factoring can provide much needed cash flow quickly to your business, without extending additional credit. Also, staffing factoring can solve finance issues when your business is unable to obtain additional credit lines from other financing sources.
Thanks to Thomas McCarthy for contributing this article to our Factoring blog:
In the staffing services industry, there can be delays in the receipt of the compensation due to your company. As the clients that your business is working with are not paying their employees directly, your staffing services company is responsible for making payroll. While delays are a part of business operations, your staffing services company will still need to make payroll for your employees, and if these delays are substantial, it can cause your business to be in a short term cash crunch.
Lack of working capital is the largest cause of business failure, as small businesses can often simply not afford to bridge the gaps in cash flow if things don’t go as they have planned. Business owners can seek traditional methods of financing through their personal banker, through applying for personal loans or even cash advances from company credit cards to meet shortages. However, these options are not always available, they can take several weeks to fund and many business owners have already exhausted these options. Factoring is a viable financing option for staffing services companies to capitalize on their receivables for the much needed cash that their business needs quickly.
Understanding Staffing Services Receivables Factoring
In the staffing services industry, it is common to have a long list of accounts receivables owed, for the services that your company has provided. These accounts receivables are a valuable asset that you can leverage through the financing option of factoring. Factoring is not a business loan, but it is a cash advance on the business’s accounts receivable assets.
When you apply to establish a relationship with a factoring company, the acceptance of your company is not established based upon the company’s credit, but upon the credit of the companies that owe you money in the form of accounts receivable. The reason for this is that the factoring company is actually going to purchase your receivables from you at a discount. The company is therefore interested in the payment history of the companies that owe your staffing services company money.
The factoring company typically pays between 75-80% of the total invoices owed to you in advance, and then they take over the responsibility of collecting the full amount from the company that owes you. Once the factoring company collects upon the invoice, they will pay you the difference owed, minus any of their applicable fees.
Most factoring companies will charge a fee that is based upon the credit risk of the companies that owe your business money and the time frame that it takes the company to pay the invoice amount. If the company pays their invoice within 30 days, the fee that the factoring company will charge is often several percentage points less than if it takes 60-120 days for the company to pay your invoice. Average factoring fees will range from 1-6%, so be sure to evaluate all of your options prior to establishing a relationship with a factoring company.
How Does Factoring Benefit Staffing Services Companies?
Factoring benefits many different kinds of industries, particularly industries such as staffing services, that have a need for quick cash flow turn around time. One of the singled largest expenses for a staffing services company is its payroll. Outsourcing your team of employees to other companies is the fundamental basis of your business model, and why everything could be going smoothly, if a client takes longer than expected to pay their invoice to your company, you could be in a position where you are required to fund your payroll without the necessary financial resources. If this is the case, things can become challenging financially for your staffing services company quickly.
Factoring provides payroll funding options for staffing services companies who are in need of quick cash flow. When you have an invoice that you would like to receive quick funding on, you can submit it to the factoring company that you have established a relationship with. The factoring company will typically issue you the needed capital within 48 hours of the invoice being submitted. This payroll factoring will allow your company to receive capital quickly so that you can meet your financial obligations on time. Also, payroll factoring can allow you take job opportunities with larger companies that have a standard invoice payment practice that is longer than smaller companies. Overall, establishing a factoring relationship will provide your staffing services company the funding that it needs to remain viable and to expand.
Staffing factoring can provide much needed cash flow quickly to your business, without extending additional credit. Also, staffing factoring can solve finance issues when your business is unable to obtain additional credit lines from other financing sources.
Thanks to Thomas McCarthy for contributing this article to our Factoring blog:
Thomas McCarthy has designed, developed & implemented financial systems for many years. Thomas was a Factoring customer for over 7 years prior becoming a business owner and webmaster.
Download our FREE EBook “Growing Your Company Without Debt” learn how Invoice Factoring may be right for your company at: http://www.dfsfactoring.com
