Factoring Articles: A Resource about Factoring and Invoice Factoring
Invoice factoring has been gaining popularity as a source of working capital for companies. Despite its growing popularity a multi billion dollar industry, factoring is not very well known and is not considered as a mainstream financing tool in the USA.
This site contains a number of articles about factoring and is a resource for anyone considering using factoring for your company. Please be sure to read the terms and conditions of this site. Also, please not that this site is for informational purposes only and does not give any legal or financial advice. Please consult a qualified professional if you require legal or financial advice.
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What is Factoring?
Invoice factoring is a business financing tool which provides working capital to companies. Most companies that engage in commercial sales need to wait 3o to 60 days to get their invoices paid. This can create cash flow problems if a company is growing, a startup or just not well capitalized. Invoice factoring provides an advance payment for slow paying invoices. This provides business owners with working capital to run and grow their businesses without having to wait for their clients to pay.
What are the Benefits of Factoring Invoices?
Factoring invoices can help businesses improve their cash flow by providing working capital to pay:
- Suppliers
- Employees
- Rent and other expenses
However, the biggest advantage of factoring your invoices is that it eliminates the uncertainty of waiting to get paid. It provides predictable cash flow and places companies on a better financial position.
Most companies that have commercial sales will qualify for factoring, provided their clients have good credit, their invoicing practices are good and their invoices are free of liens and encumbrances.
How it Works: Quick Summary
Invoice factoring is fairly straight forward and can be used by most companies. Here is how it works:
- You deliver your product or complete your work.
- You send an invoice to your client
- When you need working capital, you send the invoice to the factoring company for financing
- The factoring company advances you about 80% of the invoice - this is your first payment
- Once your client pays the invoice, you get the remaining 20%, minus the factoring fee
What is a Factoring Company?
A factoring company is a type of financial services company, which specializes in providing working capital to businesses.
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