Factoring Financing Articles

Can’t afford to wait 30 to 60 days to get paid by your clients? If you are like most business owners, waiting to be paid can be very challenging. In some cases it can mean lost opportunities. It can mean that you don’t bid for big sales because you know you won’t be able to play the waiting game. At its worst, it can spell disaster. It can mean that you need to delay payroll. It may mean that you don’t pay rent or taxes. It may force you to shut down your business.

If you are like most business owners, your first reaction will be to call your banker. Unfortunately, banks will not lend money to businesses that are new, have no hard assets or don’t have three years worth of profitable financial statements. At this point, most business owners give up, thinking that they don’t have any other options. However, they do.

If your company sells products or services to large credit worthy companies, you could qualify for invoice factoring financing. Invoice factoring reduces the time it takes for you to get your money to one day. How quickly could you grow your business if your invoices were paid in 24 hours?

As opposed to bank loans, factoring companies do not require hard collateral. The only requirement is that you have invoices form credit worthy clients. Factoring companies work differently than banks. A factoring company will provide you with financing based specifically on your invoices. This means that if your invoicing grows, your financing also grows.

Factoring is very simple:

1. You generate invoices for your products or services
2. You submit the invoices to your clients and to the factoring company
3. The factoring company advances you up to 85% of the gross value of your invoices (the remaining is kept as a reserve to offset disputes)
4. Once the invoice is paid by your client, the factoring company releases the 15% reserve and charges their fee

Factoring financing is easy to qualify for and can virtually eliminate the 30 to 60 days it takes for your customers to pay. It provides you with the necessary working capital to grow your company and take new opportunities.

Managing a company’s cash flow can be one of the toughest jobs in a business, especially if you sell products and services to other businesses or government agencies. Most commercial and government clients pay their invoices in about 45 days. In the meantime you still need to pay regular business expenses and salaries. Although established companies may be able to absorb the wait, most new and growing companies can’t. They just don’t have the financial resources to do so.

One approach is to try and get a quicker payment from your clients. This seldom works. Most companies and government purchasing agents will insist on paying invoices in the usual schedule. And, you run the risk of losing the contract as your client may start questioning your company’s financial ability to meet its obligations. Another strategy is to look for a business loan from your bank. However, banks only provide business loans to companies that have solid financials and a substantial track record of profitable operations. Unfortunately, the kind of business financing that banks offer is outside the reach of most business owners.

There is an alternative. Let’s say that you had an agreement where your clients would pay you 80% of your invoice upon delivery and the remaining 20% after 45 days. Most companies would not have any cash flow problems if they could secure those payment terms. They would have enough money to cover their businesses expenses and tackle new projects. Unfortunately, most clients won’t offer those terms to you. However, you can get a similar arrangement from a factoring company by factoring your invoices. This enables you to give your clients 45 days to pay without problems.
Factoring financing provides a simple but valuable proposition. You get about 80% of your invoice immediately upon delivery of your services. The remaining 20%, less a small fee, is given to you as soon as your client pays for the invoice. This arrangement provides you with predictable cash flow, enabling you to meet ongoing expenses and putting you in the path to growth. Furthermore, invoice factoring is flexible and can grow with your company. Financing is tied to your sales, which means that it expands as your company grows.

Getting a factoring financing facility is a lot easier and quicker than getting a business loan. It usually takes about a week to set it up. The biggest requirement to qualify is to do business with companies (or government agencies) that pay their invoices on time. And, factoring can be quite affordable too. The cost of the service is determined by the size of your financing facility and the credit quality of your clients. Monthly costs can range from 1.5% to 3.5% depending on these criteria.

Most companies that have decent profit margins and are challenged by slow paying customers can benefit from factoring invoices. The benefits, such as having a predictable cash flow and being able to meet expenses on time, sure outweigh its cost.

Looking for small business financing has always been a challenge for company owners. Even in good times, qualifying for the financing you need has been difficult. As a rule, most banks require that your company has a track record of success and they need a few years worth of financial history. Most importantly, institutions want to make sure you have collateral – things like equipment and real estate – to back your business loan. Because of this, many industries with no hard assets such as staffing and consulting have a hard time obtaining business loans.

There are others form of financing that can help business owners – at least in some specific situations. One form of financing that has been gaining traction in the past few years is invoice financing. It can be an ideal solution for companies that are waiting 30 to 60 days to get their invoices paid, but need the money sooner.

For example, let’s say that a staffing agency invoices $200,000 to a client that will be pay in 45 days. In the meantime, the agency needs to pay employee salaries every two weeks. If the company does not have enough capital to pay employees while waiting to get paid, then it will run into problems. In this case, a solution is to get an advance on the invoice by factoring it.

In a factoring transaction, the factoring company advances funds against an invoice. The advance is usually 70% to 90% of the invoices and varies by industry. The advance provides working capital that enables the owners to meet payroll and other business expenses. Once your client pays the invoice in full, you get the remaining funds, less the factoring fee. The fee varies based on a number of parameters but can range from 1.5% to 4.0% for an invoice payable in 30 days.

Qualifying for accounts receivable factoring is relatively easy, when compared to other business financing products. To qualify, the company must be in good standing, free of any liens and have a roster of good paying customers. Factoring companies consider your invoices to be your biggest asset and are very happy to use those as collateral. That makes their services accessible to companies of all sizes, including startups. More importantly, it provides funds to companies whose biggest assets are a good reputation and a list of solid clients.

Do you have clients that take 30, 60 or even 90 days to pay their invoices? If you do, you are familiar with the strain that slow payments place on your company. Unless you have a reliable cushion of funds in the bank, paying suppliers and employees on time will be tough. And growing your business may be out of the question, at least temporarily, because growth requires cash.

Companies that have this predicament have a couple of options. They can get a bank loan or a line of credit. But those are tough to qualify for and very hard to obtain. A better alternative is to use invoice financing, better known as invoice factoring. As a tool, factoring invoices enables you to get paid in 2 days, rather than in 30, enabling you to operate and grow your business.

Factoring invoices has many advantages over other products. First, factoring is relatively easy to obtain. Second, factoring financing lines are directly tied to your sales and have no arbitrary limits. That means that the more you sell, the more financing you can obtain.

When is it appropriate to use receivables factoring?

If any of the following two statements are true, then accounts receivable factoring should benefit your company.

1. You cannot afford to wait 30 to 60 days to get paid by customers. If your company’s biggest problem is that you need your money sooner than the usual 30 to 60 days it takes for your clients to pay, then factoring is the ideal product for you. Factoring can eliminate the wait and make your cash flow predictable.

2. You need money to pay suppliers or employees. Companies that need money to pay for ongoing expenses, such as employees or suppliers, can really benefit from invoice financing. Invoice factoring will streamline cash flow and help you meet ongoing obligations. However, companies that need the funds to purchase equipment or to buy real estate will usually not benefit much from factoring. There are other products in the market that will be better.

Factoring invoices is a great tool that can help make payments predictable. This allows you to plan for growth and enables you to capitalize on new and exciting growth opportunities.

Managing their cash flow can be one of the most important duties of a business owner or manager. And it can be one of the most challenging. Most companies have clients that pay invoices in 30 to 60 days. Many times, this forces business owners to juggle payments to suppliers while they themselves are waiting to be paid by clients. The end result is that you miss taking certain opportunities because you lack the working capital to pursue them.

If your clients are not willing to pay you sooner, your best alternative is to use a factoring advance. Invoice factoring provides you with a substantial advance, usually 80% of your invoices, quickly after invoicing. This provides you with immediate working capital to pay suppliers and employees. Also as important, it provides you with working capital to follow new opportunities to grow your company.

Accounts receivable factoring is a type of business financing that is offered by factoring companies. It is not a business loan, but rather an advance on an invoice. This difference makes it much easier to qualify for than conventional small business loans. The biggest requirement to qualify is that you must do business with clients who are solid payers. An invoice factoring financing line can also be set up quickly. Getting started takes about a week, and subsequent financings can be done within one business day.

Receivable factoring transactions are set up differently than other financing transactions. For starters, the factoring company is buying the financial rights to your invoice, for a fee. They buy your invoice in two installments. The first installment, called the advance, is paid immediately at invoicing and is about 80% of the gross value of your invoice. The second installment, called the rebate, is paid once your client pays the invoice in full. This rebate is the remaining 20%, less a small financing fee.

Factoring fees vary and are based on the size of your financial line, the credit quality of your clients and the timeliness of their payments. They generally range from 1.5% for large accounts to 4% for modest sized lines.

Although factoring invoices does not fit every business, it is a great solution for companies that have to wait up to 60 days to get paid for their invoices – but can’t wait.

Factoring financing is one of those business financing tools that is not well known by the general public but widely used in the business community. It is widely used, because it’s easy to implement, can be set up in a few days and can provide the working capital that a business owner need to grow their business.

When a business owner needs working capital, the first thing they do is to visit their banker. However, they soon learn that getting funding from a bank is very hard. As an owner, the bank will demand that they have great personal credit. The bank will also want to see three years worth of audited financial statements – showing a profit.

If your business is new, it’s close to impossible to qualify for bank financing. However, factoring may be an alternative that is better for your business, and easier to get.

If you have clients that take 30, 45 or even 60 days to pay their invoices, and if this is hurting your business, invoice factoring can help. Factoring can provide you with a substantial advance on your invoices, providing the working capital you need to pay suppliers and employees. And, as opposed to conventional business loans, receivables factoring is easy to obtain.

Invoice factoring is also easy to integrate to all businesses. This is how a transaction looks:

1. You deliver the goods or services
2. You invoice your client
3. The factoring company advances you up to 85% of your invoice as a 1st installment. You can use these funds to pay suppliers and employees
4. Once the invoice is paid for, you receive the remaining 15% less the factoring fees.

Most factoring fees range between 1.5% to 3.5% based on certain criteria, but different factoring companies assess their fees differently. The biggest criteria to qualify for factoring is that you should do business with customers that pay their invoices reliably, such as government agencies or large corporations.

One of the biggest advantages of factoring financing is that it is tied to your sales. So as your sales grow, your financing also grows. This makes it an ideal tool for companies that are expanding.

Are you selling products or services to the federal government? Every year, city, county, state and the federal government buy billions of dollars in goods and services from business of all types.

Although doing business with the government is great and financially rewarding, it can also be hard on your cash flow. Why? Government agencies take, on average, about 40 days to pay their invoices. In the meantime, you have to cover all your recurring expenses such as payroll, rent and supplier payments.

This is not a problem if you have 60 days worth of operating capital in your bank account. But what if you don’t? In that case, many business owners will try to get a business loan. Although that may help, business loans are tough to get and take a long time to set up. Also, business loans have set limits.

What business owners need, is a product that provides financing solely based on the business opportunity – on sales possibilities. This product exists and is called invoice factoring. There are many factoring companies that specialize in factoring government contractors and vendors.

Invoice factoring accelerates your government payments, and enables you to get paid in days rather than months. It’s a form of financing where the factoring company advances you money against your government receivables. You get to use the funds immediately, while waiting to get paid. Once the government pays, the transaction is settled.

If you are reselling products to the government, you should also consider purchase order financing. In this case, the factoring company provides you with financing to pay your suppliers, enabling you to make the sale. Purchase order financing works well with invoice factoring and can also help you grow your company – exponentially.

So, if you own a business that sells to the government, be sure to look into factoring and purchase order financing.

Many business owners think that the most effective way to finance their companies is to secure venture (or Angel) financing. Venture capital has a number of advantages, however, there are two major disadvantages that should be considered. The first one is that venture capital is very hard to obtain. The second disadvantage, which is the focus of this article, is that venture capital requires that you give up an equity stake (ownership) and some control to the venture company. Many times, the ownership stakes that VC’s require can be substantial, leaving the founders in a minority ownership/control position.

There is an alternative to venture capital that is often overlooked. It’s a form of business financing that provides you with the capital you need to cover operating expenses and grow your company. It’s easier to obtain than a business loan or conventional venture capital funding. The catch is that it only works for certain types of companies.

Does your company sell its products to other companies or to government entities? If you do, then you are familiar with the fact that most companies pay their invoices in 30 to 60 days. However, while waiting for payment, you still need to pay suppliers and employees. Few startups or growing companies have the necessary reserves to cover expenses while they wait to get paid. This restricts their ability to grow and capitalize opportunities. This is where factoring your accounts receivable can help you dramatically.

Invoice factoring, as it is commonly referred to, provides you with an immediate advance on your invoices. Factoring eliminates the need to wait for payment and provides you with the liquidity to pay suppliers and employees. It gives you a solid financial footing that enables you to take on new business opportunities.

One of the biggest advantages of factoring receivables is that it’s fairly easy to obtain. To qualify for it, your company must do business with credit worthy clients, such as large companies or government agencies. This is the most important requirement because your invoices to those clients are used as collateral.

A substantial benefit of receivable factoring is that you will never have to give the factoring company any equity or ownership in your business. Once you meet your business objectives – you can finish your relationship with the factoring company with no further obligation.

The cost of factoring varies based on a number of parameters, such as the amount of financing you need, the credit quality of your clients and the stability of your company. As a rule, monthly rates go from 1.5% to 3% based on these criteria.

If your company sells products and wait up to 90 days to get paid, you should consider factoring as an alternative to finance your company.

Waiting 30, 40 or even 60 days to get invoices paid can be a major challenge for any business owner. Although the work has been completed and delivered, the payment will come in weeks. In the meantime, the business has to pay employees, rent and regular expenses. If your business has a substantial cash reserve, this should not be a major problem.

But, what if your business doesn’t have substantial cash reserve? Many owners will try to get a business loan. But that won’t help. Why? Because getting a business loan is almost impossible unless the business owner has good credit and can prove three years worth of profitable business operations. Another option that is quickly gaining popularity involves factoring invoices.

Factoring financing allows you to eliminate the payment wait and gets your invoices paid in as little as two days. With invoice factoring you eliminate the uncertainty of when you’ll be paid, which allows you to better manage and grow your business. Receivables factoring is easy to obtain and can be set up in days. Furthermore, if used properly accounts receivable factoring can work better that a business loan.

Here is how the factoring invoices works:
1. You deliver goods/services to your client
2. You sell the invoice to the factoring company
3. The factoring company pays you the 1st installment which can be as much as 90% of the invoice
4. Once your customer pays the invoice, the factoring company rebates you the 2nd installment, less the fees.

Since factoring companies buy your invoices, the biggest requirement to qualify for this type of financing is that you do business with customers that pay reliably. The cost of factoring will in large be determined by the volume of financing and the paying quality of customers. Generally speaking, the cost will range between 1.5% and 3.5% per month.

One big advantage of factoring over others types of financing is that there are no arbitrary limits or ceilings placed on your financing line. Whereas loans and lines of credit always have a “maximum”, factoring has no maximums. Your factoring line will grow with your sales, provided you sell products to good paying clients.

So, if you are looking for a reliable way to finance your growing business, be sure to consider using a factoring service.

Securing funding for a new venture has always been a challenge for business owners. Ensuring that the company has the proper level of financing is one of the most critical tasks. However, finding financing for a new venture can be very hard. On one side, you can try and secure venture or angel funding. This type of funding will require that you give up a portion of your equity/ownership in the business. It means you will end up with additional partners – or managers – in your company.

Another route consists of trying to get conventional business financing, such as a business loan. However, few startups can get business loans because most financial institutions require that the company have a track record of successful operations and substantial assets. Since most startups don’t have long track records and have few assets, few can meet these requirements.

Cash flow can even be more problematic for companies that sell to other businesses or to government agencies. This is because they usually have to invoice when they deliver the goods, and then wait 30 to 60 days to get paid. Growing a business while waiting a month or two to get paid can be hard to do. Many times growth is delayed and opportunities are passed. This is an alternative however.

What would happen if you could get your invoices paid in 1 or 2 business days and essentially ran a cash business? Would you still need financing? Would you still turn away opportunities? This can be accomplished by using a neat financial trick – factoring your invoices.

Invoice factoring enables you to get a substantial portion of your invoices paid immediately, providing you with the funds you need to pay suppliers and employees. More important, you get the funds you need to keep up with your growing orders. If you have a business that is firing on all cylinders, factoring accounts receivables can really help fuel your company’s growth.

Factoring offers a simple proposition. A finance company, called a factoring company, advances you up to 80% of the net value of your invoices. You get the immediate funds while the factoring company waits to get paid. Once they get paid, you get the remaining 20%, less the factoring fee.

One of the more important features of factoring receivables is that factoring companies biggest criteria (though not the only one) for providing financing is the quality of your clients. This means that if you do business with large credit worthy companies you stand a good chance of qualifying for financing. Furthermore, Invoice factoring can be setup quickly. Usually it takes a week or two to set up an account, and after that, funding can be done daily.

Although factoring financing has been around for a long time, it has been gaining traction and notoriety recently as a solution for growing companies. It offers great flexibility, as your financing is determined by your sales and the quality of your clients. This makes it a great solution for companies whose biggest asset is the clients that they do business with.

Obtaining growth capital has always been a major challenge – and stumbling block – for companies. Many business owners feel that the available options from a bank, basically a business loan or a line of credit, are close to impossible to obtain. Furthermore, most business owners have to go through a loan underwriting cumbersome process that takes weeks only to find out if they qualify. And, more often than not, they don’t qualify because banks have tough requirements and usually demand that the business owner have spotless credit.

However, if you own a business that is selling services or products to good commercial clients, you have an alternative option. And you won’t find it at a bank.

The option is called accounts receivable factoring and it enables you to capitalize on your biggest asset, your invoices from great clients. Factoring provides you with the working capital you need to grow your business and can help you if your biggest challenge is that your customers pay in 30 to 60 days. Factoring provides you with an advance payment, giving you the necessary funds to meet ongoing expenses such as payroll or rent. It eliminates the 60 day wait and gets you paid in as little as 2 days.

As opposed to business loans or lines of credit, accounts receivable factoring is easy to obtain. The biggest requirement is that you do business with clients that are creditworthy and pay reliably. It can work with startups or established companies. Furthermore, accounts receivable financing lines have limits that are tied to your sales. This means that as your sales increase, so does your financing.

Receivables factoring is also fairly easy to use. It works as follows:

1. You deliver goods / services and invoice for them
2. The factoring company buys your invoice and advances you up to 90% (1st installment) of the invoice
3. Once the invoice is paid, the factoring company rebates the remain funds less a small fee (the 2nd installment)

Receivable financing fees vary based on a number of parameters but can range from 1.5% to 3%, making it a very affordable business financing tool. To qualify for accounts receivable factoring, your company must sell goods / services to commercial or government customers and have profit margins of at least 10%.

If you sell goods/services to other businesses or to the government, then you know that commonly you have to wait 30 to 60 days to get paid for your services. Unless your business is well capitalized, waiting to get paid can drain your working capital and affect your business.

Lack of working capital can prevent you from making new sales, forcing you to sentd customers to your competition. What is worse, if the problem is not corrected, it can affect you ability to pay employees or suppliers. Missing payroll and supplier payments is a sure indication that a business is in serious financial troubles. The solution to this problem is, of course, simple. You just need to get business financing.

Obtaining business financing (such as a line of credit or business loan) is easier said than done. If you go to a bank, they will require that you provide them with three years audited financials and a solid business plan. That kills any chances of financing for most startups and new businesses. There is, however, an alternative form of financing that can help you get working capital. And, it almost always works better than a business loan. It is called factoring financing.

Invoice factoring provides your business with a substantial advance on your slow paying invoices – sometimes up to 85% of what you have invoiced. You can use the advance as working capital to cover new sales orders, payroll or supplier payments. Factoring receivables provides you with relief form slow payments and provides you with the working capital you need to grow.

Factoring receivables is simple to use and works as follows:

1. You provide the product/service to your client and send an invoice to them
2. You send a copy of the invoice to the factoring company
3. The factoring company advances you up to 85%. This is your first installment
4. Once your client pays, the remaining 15% (second installment) is advanced, less a small service fee

The fee you pay will be based on the sales volume that you finance and the credit quality of your clients. Fees can generally range from 1.5% to 3.5% per month.

On of the big advantages of factoring receivables is that it is easy to obtain and can be set up in a few days. Most new and established businesses can qualify easily. The biggest requirement to qualify is that you must do business with reputable clients or government entities.

Peter owns a successful business that is growing quickly. Like many businesses, Peter’s company has good commercial and government clients that buy regularly from him. And since Peter is really good at his business, his clients have been purchasing more and more products from him. His business appears solid.

But some cracks are starting to appear in the foundation. He’s been close to missing payroll twice. He’s delaying supplier payments. Even worse, he chose not to bid for a major government contract because he couldn’t afford to. That’s true – he couldn’t afford to bid for new business. He was afraid of having to add more employees and buy more materials.

How can that be?

Like most business owners, Peter extends terms to his clients. They usually pay him in 30 to 45 days. But, since Peter runs a small business, his suppliers demand that he pay them in 10 days. Plus employees need to be paid every two weeks.

In summary. Peter has clients that want to pay in 45 days and suppliers/employees that want to be paid in 10. Since the company does not have a lot of money in the bank, the math doesn’t work.

Is there a solution? Yes, Peter should consider factoring his invoices to fix his cash flow. Factoring will provide him with the necessary cash to pay suppliers and employees, while eliminating the 30 to 45 day wait to get paid.

Invoice factoring works as follows:

1. You deliver the product or service and invoice your client
2. You send a copy of the invoice to the factoring company for financing
3. The factoring company advances you up to 90% of the invoice. You get immediate funds.
4. Once your client pays the invoice, the transaction is settled

With factoring, Peter will be able to meet his current obligations. His company will also have enough cash on hand (or liquidity) to bid on new job proposals, allowing him to grow the business and take it to the next level.

Waiting up to 60 days to get your invoices paid can really be a major source of stress for business owners. This can be especially painful if you have to pay rent, suppliers and meet payroll. This is even more painful when most of your money is tied up in slow paying invoices. Having money tied up in slow paying invoices can also prevent you from capitalizing on new opportunities. Why? Because few business owners can deliver large orders to new clients and then underwrite the transaction for up to 60 days.

If you cannot afford to wait to get paid by your clients there is a solution that can provide you with the necessary financing. It’s called factoring financing. With factoring you can accelerate the payment for your invoices and get funding to pay rent, pay your suppliers, meet payroll and take on new projects.

As opposed to bank financing, invoice factoring is easy to qualify for. The main requirement for invoice financing is that you have invoices from mid size and large commercial customers. Most factoring companies are comfortable working with new companies – even if they have no hard collateral – provided that they have good invoices and a solid business plan.

Another advantage of factoring is that your financing is not fixed on any specific amount, like a loan or line of credit. You can usually factor as many invoices as you can deliver on. As a tool, factoring allows you to tap into the power of your greatest asset – your roster of credit worthy customers. It allows you to grow and capitalize on new opportunities, while circumventing the restrictions and challenges of obtaining regular bank financing.

Running a business in Canada has always had its particular set of challenges. One of the biggest challenges has always been finding the right business financing. The market has been dominated by banks and institutions, which have very tough and strict lending criteria. Obtaining a business loan or almost any other type of business financing in Canada in pretty difficult. However, that is changing. Quickly.

Recently, Canada has seen an increase in the number of independent financing companies that specialize in business financing. Some offer business loans, but the majority have focused on offering invoice discounting (also know as invoice factoring). Although a relatively young industry, the Canadian factoring industry is growing quickly. But, what is invoice discounting?

One of the biggest problems for small and mid sized businesses is waiting up to 60 days to get invoices paid by their commercial clients. This can affect their ability to pay rent, suppliers or salaries on time. This problem is common for many businesses, such as trucking companies, staffing agencies, manufacturers, consultants and others. Invoice discounting is a financial product that eliminates slow paying invoices by financing them.

The factoring process is very simple. Once you invoice an approved client, you send a copy of the invoice to the financing company (also known as the factoring company). The factoring company advances you a significant portion of the invoice while they wait to get paid by your customer. The transaction is settled once the customer pays the invoice. The factoring company offers this service for a small fee or discount.

An invoice discounting arrangement provides you with the necessary funding to pay expenses such as rent, suppliers and employee salaries. This enables you to operate your business efficiently, without worrying about when your clients will pay. Furthermore, invoice discounting can help you win bigger clients, because it eliminates the worries of having to wait for them to pay.

As opposed to bank financing, invoice factoring is relatively easy to obtain. The biggest requirement is that you do business with established clients who pay their invoices regularly. Invoice discounting is truly a flexible product that is within easy reach of small and mid sized businesses.

Do you have clients that take up to 60 days to pay their invoices? If you do, you know how tough that can be on new and growing companies. Waiting to get paid for your slow paying invoices can wreck complete havoc on your company’s finances.

Most business owners try to address this issue by going to a bank to try and get a business loan. However, banks are notoriously conservative and getting a business loan can be very difficult. This is where a factoring company can help you.

Factoring companies eliminate the 60 day wait and get your invoices paid in as little as 2 days. How? By buying your invoices and paying you immediately for them. You get the financing you need, while the factoring company waits to get paid by your client. You get money to meet immediate expenses such as payroll, rent and supplier payments.

Factoring transactions a fairly simple and take 4 steps:

1. You invoice your client and sell the invoice to the factoring company
2. The factoring company advances you the first payment of 70 to 90% of the invoice
3. The factoring company waits to get paid by the client
4. Once paid, the factoring company provides you with the second payment, called the rebate (less a small fee)

One of the big advantages of working with a factoring company is that they can usually extend you more financing than a bank can. Whereas a bank will set a credit limit based on your company’s financial situation, the factoring company will set a limit based on your sales potential. This allows you to grow your company to its true potential.

Most sales to commercial clients usually carry 30 to 60 day payment terms. This means that as a supplier, you must deliver your products or services now. However, your client has between 30 to 60 days to pay you.

This creates a significant challenge for owners of small and midsize businesses. The problem is simple. Your clients want to pay you in 30 to 60 days, but you must pay rent, payroll and your suppliers now. As you can see, the math does not work. Unless you have a substantial bank account, this leads to an almost impossible situation.

If you are in this situation, it is also very likely that the bank will not be able to help you. As you well know, banks only lend to businesses that have three years of profitable operations and significant hard collateral. If you do not qualify for bank financing, your best bet may be to consider factoring.

Factoring is a business financing tool that helps business owners who cannot afford to wait 30 to 60 days to get paid by their commercial customers. Factoring provides you with the necessary funds to meet payroll, make rent and pay your suppliers on time.

As opposed to bank financing, factoring is easy to qualify for. The main requirements are that you have a profitable business with a strong roster of commercial clients. For the factoring company, your best collateral is the invoices from your strong customers.

Factoring is also easy to use. It enables you receive a substantial portion of your billings within a day of invoicing. It reduces the time you wait to get paid from 60 days to 2 days. The transaction is usually structured as a two installment sale of an invoice. The first installment, called the advance, is paid to you immediately. The advance can be anywhere between 70% and 90% of the gross value of the invoice. The remaining portion (10% – 30%) is held as a reserve to cover disputes and charge backs. The reserve is rebated as soon as the invoice is paid in full. The factoring company will charge a small fee for this service.

Factoring financing is an ideal tool for companies that are growing and that cannot afford to wait to get paid by the clients. It helps you to stabilize your financial situation and positions you for growth.

There was a time when obtaining business financing in Canada was very hard. But this is changing as small business financing companies are moving into an area previously dominated by large banking institutions.

As most business owners know, qualifying for a business loan or a line of credit is very hard. Bank lending criteria is so strict that few companies ever manage to get any financing. But that is changing.

If you own a company that sells goods or services to other businesses (or the government), then there are two financing options that are available to you. They are invoice factoring and purchase order financing.

Are your clients taking up to 60 days to pay their invoices? Consider invoice factoring.

Selling to mid size and large companies is great, as they can provide you with reliable and steady business. However, their payment terms are always challenging. They usually demand the right to pay in up to 60 days. In the meantime, you must cover paying rent, salaries and suppliers. This can easily be fixed by factoring financing. Factoring can eliminate the 60-day wait and get your invoice paid in 2 days. The process is simple, you sell your invoices to a factoring company, who pays you up front for them (less a small fee). You get your money up front, while the factoring company waits to get paid.

Need money to pay your suppliers? Consider purchase order financing.

If you sell products as a reseller or wholesaler, then your biggest challenge is getting the financing to pay your suppliers. In this case, purchase order financing may be the right solution for you. Purchase order funding provides you with the necessary funds to cover your supplier expenses, allowing you to fulfill the order and deliver to your clients. The transaction is then settled when your client pays their invoice and the collateral is the purchase order from your client.

Conclusion
Both factoring and purchase order funding are easy to obtain and can be set up in days. The biggest requirement is that you own a profitable company and that you do business with reputable clients.

In short, yes. Provided that your company meets certain criteria.

Invoice factoring has been gaining popularity as a tool to finance growing businesses. It is a solution that accelerates payments from slow paying clients, freeing up cash flow and allowing companies to grow. By eliminating the uncertainties of when they’ll be paid, business owners can use factoring to stabilize their business and put it on a growth path.

However, factoring is not for everyone. For factoring to work, your business must meet certain criteria:

1. It must be established and have commercial or government (not consumer) sales
2. Your profit margins must be at least 12% or higher
3. Your biggest problem must be that clients are taking too long to pay their invoices

If you fit these criteria, then there is a chance that factoring financing will be a good solution for your business. It may not be as inexpensive as a business loan, but certainly will be significantly more flexible and easier to obtain.

Factoring will help you if:

1. You are turning away orders because you lack the cash flow
2. You risk missing key payments (rent, suppliers, payroll) because of cash flow

Factoring transactions are relatively simple. Once you invoice your client, you sell your invoice to the factor, who advances you up to 85% (on average) for your invoice. 15% is usually kept as a cushion to handle potential issues with the invoice. You get immediate funds from the advance while the factoring company waits to get paid. Once the client pays the invoice, the factoring company will rebate the 15% less their fee.

Factoring costs can vary depending on your financed volume, credit quality of your clients, payment cycles and industry. Generally speaking, factoring will cost 1.5% to 3.5% per month. However, most factors break their pricing in smaller ten-day increments, making cost more attractive. So a factor that charges 2.7% per month, would actually charge you 0.9% for every ten days the invoice is outstanding.

As you can see, invoice factoring is a reasonable alternative to other financing products, provided that you can meet certain criteria. Qualifying for invoice factoring is very easy, the biggest requirement is that you do business with credit worthy commercial or government clients.

Sooner or later, every business will need financing to grow. Most owners will try to qualify for venture capital or angel financing. Others will try to get a business loan or line of credit, since business loans are popular with business owners.

All these business financing tools work well, but they also have a very important trait in common. They are hard to get and out of reach for most owners.

There is an alternative way of financing your business growth. Financing that is easy to qualify for, quick to set up and very cost effective. Not only that, it’s financing that grows with your business. And most of the time, you won’t get it from your local bank. This form of financing is called invoice factoring and you can get it from a factoring company.

Factoring is different than a bank loan and it works well if your biggest problem is that you can’t wait the 30 to 60 days that commercial clients take to pay their invoices. Basically, invoice factoring cuts the payment time to two days.

Factoring is simple. The factoring company buys your invoices (at a small discount) and pays you for them immediately. Then, the factoring company waits to get paid by your client. The net result: you get immediate working capital to pay business expenses and grow. You also eliminate the stress of having to wait to get paid and can count on a predictable cash flow.

As a form of financing, factoring offers two very distinct advantages over bank loans. First, it’s very easy to qualify for. Your main requirement is that you do business with strong commercial clients (or the government). Second, factoring financing grows with your business. As your invoicing grows, so does your financing. This enables you to easily cover the increasing costs of running a business that is growing.

A similar type of financing that is also offered by factoring companies is purchase order financing. Purchase order financing provides you with financing based on your purchase orders from large commercial clients. Purchase order financing is ideal for re-sellers and distributors that are growing quickly.

Whether you need financing because your customers pay you in 60 days or because you have a large purchase order from your biggest client, a factoring company will be able to offer alternatives to traditional financing.

Are you stuck with great but slow paying clients? It is interesting how your biggest asset (great clients) can also be your biggest liability. But that is how business is. And as an owner you must adapt.

Whether you like it or not, slow paying customers are here to stay. As a rule of thumb, commercial clients pay their bills in 30 to 60 days. And lately, the trend has been deteriorating. So, what do you do if you have slow paying receivables.

Many owners try to go to the bank to get a business loan. Not surprisingly, few business owners get business loans. As a rule, banks will only offer business financing to companies that have long and established histories. This is not your case if your company is new or emerging from tough times.

If your biggest challenge is that you cannot afford to wait up to 60 days to get paid by your customers, then the solution is accounts receivable factoring. Most commonly known as factoring, this type of financing eliminates the usual wait to get paid. It provides you with the necessary funds to pay suppliers, meet payroll and take on new business opportunities.

And how does factoring work? Simple:

1. You finish the work and send an invoice to your client. You also send a copy to the accounts receivable factoring company.
2. The financing company advances you 70% to 90% of the invoice (a small reserve is held to handle disputes, etc.)
3. You get the funds in 24 hours
4. As soon the customer pays the invoice to the factoring company, they rebate the reserve (less a small fee)

As you can see, accounts receivable factoring can easily be integrated into your business, providing you with prompt invoice payments. Usually, funds are advanced within 24 hours of submitting invoices.

Accounts receivable factoring is easy to qualify for. Accounts can be set up in as little as 4 business days. As opposed to small business loans, the main requirement for factoring is to do business with strong credit worthy customers. So if you do business with good commercial clients (or the government), be sure to add factoring to your business tool chest.

If you sell goods or services to commercial or government accounts you are very familiar with the fact that you have to offer your clients 30 to 60 days to pay their invoices. However, offering 30 day payment terms can be very challenging for business owners who must cover all the business’s expenses while they wait to get paid. This quickly eats up any cash reserves and puts the business in a challenging position. Unfortunately, when it comes to getting paid, hurry up and wait seems to be the name of the game.

But there is a solution to this problem that you won’t find at your local bank. It’s called accounts receivable factoring. It has the following benefits:

1. It gets your invoices paid in 24 hours, eliminating long payment waits
2. Factoring is easy to obtain
3. Setting up an account takes just a couple of days

Although factoring provides your business with working capital, it is not a business loan. It is an advance on your outstanding invoices. Because of this, factoring invoices is easy to obtain provided that you do business with reliable customers. Furthermore, invoice factoring easily integrates into your company. It works as follows:

1. You deliver the goods or services and invoice your client
2. You send the invoice to the factoring company, who advances you up to 85% of your invoice as a first installment
3. You get to use the funds to pay business expenses, while the factoring company waits to get paid by your client
4. Once the factoring company gets paid, it rebates the remaining 15% as a second installment, less a small service fee

Factoring service fees vary based on a number of variables, such as monthly factored volume and how long it takes for an invoice to get paid. Based on these, fees can range from 1.5% to 6%. Generally speaking, receivables factoring is very affordable if your clients pay their in 45 days or less.

Factoring invoices is a great alternative for startups and established companies that have exhausted their bank resources. It’s a flexible product that is tied to your sales performance, this means that you will not get a fixed line. If your sales increase, so does your financing. This makes receivables factoring, an ideal product for growing companies.