Factoring Financing Articles

As a result of the current credit environment, finding the necessary business financing to grow their companies has become the full time job of many CEO’s, CFO’s and company owners. For example, venture capital has become increasingly difficult to get – and understandably so. Some venture capitalists are being extremely cautious, while others just have their own financial problems and are not in a position to finance other companies. Other institutions are not too helpful either. For example, getting a business loan has become increasingly more difficult, and in some instances, impossible to obtain. Many institutions require audited financial statements, proof of hard assets, excellent credit among other things before issuing a business loan. Unfortunately, this puts business loans out of the reach of many businesses – especially those that don’t have collateral in the traditional sense of the word. There is a possible solution though.

Some businesses may be able to use accounts receivable factoring to fund their growth. One of the biggest challenges for companies that have commercial sales is having to wait 30 to 60 days to get paid. This also applies to government contractors and suppliers who must also wait to get paid. Many companies would not need a business loan or venture capital to finance their growth, if their clients paid quickly. You can achieve this using accounts receivable factoring. This form of financing has a number of advantages over other forms of financing. By factoring receivables you can get working capital for your company without while minimizing the problems – and hassles – of waiting 30 to 60 days to get paid.

Getting a receivables factoring financing line is fairly simple, since the main qualification criteria is that you do business with credit worthy clients. But more importantly, accounts receivable factoring is dynamic, and grows (almost automatically) with your sales. This makes it an ideal solution for companies that are growing and have solid prospect – but are having challenges finding a financial partner to back their business.

Funding a business in the current environment has been a challenge for company owners. The business financing environment has not been friendly business owners, in part because many funding companies had problems of their own. Because of this, they have tightened their commitment requirements.

Some companies have tried a different approach and opted to look for business loans. Unfortunately, trying to get a business loan in the current environment is also very difficult. Most institutions are being very cautious and only lending money to companies that meet very strict criteria. For example, you may need to show that they have been profitable for a number of years, have seasoned managers, include audited financial statements and have other assets. This puts business loans out of the reach of most businesses, at least at this time. So, is there an alternative? In fact, there is.

If your company has commercial or government clients, you may want to consider accounts receivable factoring. Most companies with commercial or government clients share the common problem of having to wait up to 60 days to get their invoices paid. Waiting this long will certainly impact your cash flow, especially if your company does not have substantial cash reserves. Factoring your invoices provides you with a solution to this problem. It provides capital to cover your business expenses without having to wait for your customers to pay you. It also enables you to take on new clients, as you no longer have to worry about net 30 or net 60 day payments.

There are several advantages to using accounts receivable factoring. The most important one is that it is easy to obtain, since the most important qualification criteria is that you have solid customers. Aside from that, it offers a dynamic form of financing. Dynamic financing lines adapt to your sales volume, and increase as your sales increase. This makes receivable factoring a great solution for growing companies that need different levels of financing as their business grows.

Accounts receivable financing can be a great alternative way to finance your company, especially in a tough credit environment.

Trying to get business financing for a transportation company in the current economic environment has been nearly impossible. This applies to both trucking companies and freight brokers. Most institutions are imposing a number of restrictions on their financing activities to the point where getting a business loan is very difficult. It’s not that institutions don’t want to make business loans – but rather – they have to be extra careful. For example, many institutions now require company financial statements for multiple years that must show profits. They need substantial assets as collateral, and usually require the business owner to have substantial assets themselves.

But, what happens if you can’t meet this criteria? Are you basically out of luck? Not really. You just need to look elsewhere.

Let’s look at a common problem in the transportation industry – cash flow. This affects brokers and carriers alike. They have expenses that they must cover immediately, such as drivers and repairs. However, they must also wait up to 60 days to get paid by their clients. If they don’t have a cushion of capital to bridge the gap – their businesses fail. There is an alternative though – it’s called factoring.

Factoring your freight bills bridges this gap in a simple and elegant way. It provides you with an advance on your freight bills, which you can use to cover your expenses. The transaction is then settled when your client pays the freight bill.

Freight factoring has a number of advantages and is easy to qualify for. Most factoring companies look at the credit of your client as the most important requirement (though not the only one) to provide financing. Although your client’s credit is important, your company should be free of liens, judgments and tax problems.

Freight bill factoring is an ideal source of financing for startup and growing transportation companies, it provides financing to cover operational expenses while you focus on growing your business. One if the biggest advantages of freight factoring is that is tied to your sales – your financing line grows as your business grows.

Are you looking for a business loan? Many business owners who need business financing start their financing search by looking for a business loan or a business line of credit. Although business loans and lines of credit are well known products, they are very hard to get. And in reality, few business owners actually manage to get them.

In certain instances, invoice factoring may be a better and easier to obtain alternative. There are three conditions that can determine whether factoring is a better alternative than a business loan:

1. Are your clients’ slow payments hurting you? Do they take up to 60 days to pay?
2. Are you turning away bigger sales because you lack working capital?
3. With the right financing, does your business have significant growth potential?

If you answered yes to these questions, then chances are that factoring your invoices will be better for you than more traditional business financing products. Invoice factoring provides you with financing based on your invoices, eliminating slow payment cycles and providing you with money to pay rent, meet payroll and expand your business.

Since factoring is tied to your sales potential, it does not have the arbitrary use limits that business loans have. The more your business grows, the more financing you qualify for. Period. This makes it an ideal product for businesses that have significant growth potential.

Factoring (or receivable factoring as it is also known) is easy to use. Once you have invoiced your customers you send a copy of the invoice to the factoring company. The factoring company, in turn, advances you up to 90% of your invoice and waits to be paid by your client. Once your client pays the invoice, the transaction is settled.

In effect, by financing your invoices you eliminate the slow payment problem. You accelerate your cash flow, enabling you to pay your obligations, take new opportunities and grow your company.

In terms of cost, factoring is a very competitive product. Factoring fees range from 1.5% to 3% per month, making it an affordable product. If you own a business that is growing and you need financing, be sure to consider invoice factoring.

If you own a business and your clients take up to 60 days to pay your invoices, you may want to consider invoice factoring. Invoice factoring eliminates the payment wait and gets your invoices paid in a couple of days. This gives you the necessary financing to pay ongoing expenses such as suppliers, salaries and rent.

But invoice factoring is different from most traditional financing. For starters, it is not a business loan, but rather, a sale of invoices. Although it may not be clear at first sight, you can finance your business by selling your invoices.

Basically, when you factor your invoices, you sell them to a factoring company, who pays you for them. When the factor buys your invoices, it’s common that they’ll pay you in two installments. The first installment, called the advance, is provided as soon as you sell the invoice. The second installment, called the rebate, is provided once your client pays for the goods/services.

Lets look at a factoring transaction to see how it works:

1. You deliver goods and services to the customer.
2. You invoice the client
3. You sell the invoice to the factoring company
4. Factoring company advances (installment #1) between 70% and 95% of the invoice
5. You get immediate money for your business
6. The customer pays the factoring company
7. The factoring company rebates you (installment #2) the remaining money, less a small fee

As you can see, the sale of your invoices provides you with accelerated funds that can be used to run and grow the business. Although factoring is a great tool, it only works to solve one very specific problem. That is, that you can’t afford to wait to get paid by your clients. However, it solves this problem better that most other financial tools. Furthermore, as opposed to bank financing, invoice factoring is easy to obtain and can usually be set up in days.

Do you have clients that take 30, 50 or 60 days to pay their invoices? Although having slow paying clients is expected in today’s business environment, they make managing cash flow a very difficult task. Paying suppliers, salaries and rent becomes a challenge.

However, there is a way to solve this problem. The solution involves factoring your invoices.

Factoring is a financing tool that allows you to get your invoices paid in as little as 2 days. It provides your company with the necessary capital to operate the business, pay suppliers and grow. However, factoring is not a business loan. Rather, factoring involves selling your invoices at a discount for immediate cash. The factoring company waits to get paid, while you get immediate use of the funds.

Factoring can easily be integrated to any business and works as follows:

1. You deliver goods or services and invoice for them
2. You sell the invoice to the factor. They give you the first installment of 70% to 90% of your invoice. This is called the advance.
3. You get immediate funds to run your business
4. Once the customer pays the factoring company, you get the second installment (of 10% to 30%) and are charged a small fee for the transaction. This is called the rebate

Although factoring costs vary and are based on transaction size and timing, the average cost of a transaction is usually between 1.5% to 3% of the invoice per month.

One major advantage of factoring is that it is easier to obtain than a business loan. Furthermore, the factoring line can be set up in about a week, and the biggest requirement for approval is that do you business with credit worthy clients.

This has to be one of the toughest times to get any type of business financing in recent history. Although the credit markets are improving and some institutions are starting to lend money, few startups are getting loans as institutions prefer to focus on businesses that have a track record. But even existing businesses are having a hard time obtaining financing. For the most part, institutions will ask for two years worth of financial records, including tax returns. And unless your business can show profitability and excellent growth prospects, chances are that your business loan may get delayed or denied. And if your records show any blemishes – your chances of getting a small business loan will be very low. Basically, institutions are only making business loans to their most promising prospects. But that leaves many businesses that have good potential out of the picture. Fortunately, there are some alternatives.

If your company sells to commercial to government clients, you are probably familiar with having to sell on terms or net 30 days. Basically, it means that you deliver your product or service today but have to wait 30 to 60 days to get paid for it. In the meantime, you still have to cover operating expenses and must continue to pay suppliers and employees until you get paid. This creates a problem for many companies for two reasons. Few companies have enough capital to wait two months to get paid. But more importantly, many companies are rejecting large orders or projects simply because they can’t afford to pay everyone else while waiting to get paid. One solutions to this problem is to use invoice financing.

Invoice financing provides a simple approach to financing your business. It eliminates waiting 30 to 60 days to get paid by providing you with an advance against your invoice. This provides you with capital to operate your business, while you wait for your customer to pay. Once your customer pays, the transaction is settled. As opposed to conventional business loans, invoice financing programs can be approved quickly and put in place in days. Invoice financing is also dynamic since your funding grows as your sales grow. This makes is an ideal solution for certain types of businesses.

We live in a credit environment that is tough. Most businesses, even those that were deemed very credit worthy not too long ago, are having a tough time getting any kind of business financing. Most banks and institutions have been hit by the financial turmoil and either lack the capital – or lack the will – to make business loans until the capital markets settle down. That is part of the problem however, since many businesses in the USA and Canada depend on business credit to function. Without it, they run into problems. This has lead to a vicious cycle, where the lack of small business loans is furthering the problem.

What can you do if your business needs financing but you can’t get a business loan? You have no other options than to look for alternatives. One of these alternatives is invoice financing, commonly known as factoring. Invoice financing can help your if your company sells to commercial or government clients (rather than retail clients) that pay their invoices in 30 to 60 days. As a matter of fact – most businesses would not have cash flow issues or need a loan if their clients paid immediately.

Of course, asking clients for an immediate payment will never work because they expect and demand, net 30 payment terms. Using invoice financing enables you to get an advance on that invoice, and provides the necessary capital to run your business. Invoice factoring enables small businesses who may not have substantial assets – aside from good customers – to get financing even in tough financing environments.

Invoice financing is simple to use. You first need to establish an account with a financing company. Once you have an account, you can start sending invoices for financing. The financing company with give you the first advance on your invoice – usually about 80%. You get the second advance, which is 20% less the financing fee, once your customer pays the actual invoice.

Credit decisions are based on your customer’s ability to pay an invoice. This enables you to leverage their credit. But more importantly, invoice financing is dynamic, and your financing line grows as your business grows.

Do you have clients that take up to 60 days to pay their accounts receivable? Waiting months to get paid for your invoices can wreak havoc in your company’s cash flow, especially if you have to meet payroll, pay suppliers and pay rent. But what happens if your business can’t wait to get paid because it must meet its obligations?

One solution to this problem has been gaining popularity recently. It’s called accounts receivable factoring and it allows you to turn your slow paying receivables into cash, almost immediately. It works by selling your receivables to a factoring company, who in turn, pays you on the spot. This provides you with the necessary cash flow to pay suppliers, rent and salaries.

Selling your receivables to a factoring company is relatively simple. It can be done with a 3-step process:

1. You deliver goods/services and issue an invoice
2. You sell the invoice to the factoring company who advances the first installment you up to 90% for them. The average advance is 80%.
3. Once your client pays the invoice, the factoring company rebates the remaining installment, less a small fee (installment #2)

As opposed to other financing products, accounts receivable factoring is easy to obtain and can be setup in a week or so. A critical benefit of a/r factoring is that the financing companies make their credit decision based on your clients. So, accounts receivable factoring is an ideal tool for small and medium sized businesses who cannot obtain bank financing but have a roster of solid customers.

Are you selling goods or services to commercial customers or to the government? If so, you are probably used to the idea of having to wait up to 60 days to get your invoices paid. However, waiting to get paid can be challenging, especially if you have business expenses that can’t wait.
That is where a factoring company can help you.

Factoring companies can provide you with financing, based on your slow paying invoices. They eliminate the 60 day payment waiting period and provide you with the necessary liquidity to meet payroll, pay rent and meet business obligations. Here is how factoring works in a nutshell:

1. You invoice your customers and send a copy of the invoice to the factoring company
2. The factoring company advances you up to 90% of your invoices
3. You get immediate use of the funds. The factoring company waits to be paid.
4. Once the factoring company is paid by the customer, the transaction is settled

Although many business owners will go to a factoring company to get financing, factoring companies also provide other important services. Most notably, factoring companies can act as your business credit department. They can review existing clients and new prospects and advise you of their payment habits. And since they manage your accounts receivable, factors can also provide you with important financial reports and financial analysis.

More importantly, a factoring company can help you grow your business. By turning your slow paying invoices into cash, they give you the financing and the flexibility to take on new opportunities. And, factoring financing lines don’t have arbitrary limits like business loans. They grow in relation to your sales. The more you sell, the more financing you get.

Because of these benefits, factoring companies can be great business partners and help finance your business growth.

Do you do business with commercial or government customers? If you answered yes to that question, that means that you are also used to waiting up to 60 days to get your invoices paid. One of the most challenging facts of doing business with big companies is that they pay slowly. Sure, they pay all right – they just take their own sweet time to do it.

But you have expenses that you have to pay now. Suppliers need to be paid. Payroll must be met. This creates a big challenge for small and medium sized businesses.

Is the solution a business loan? It seldom is. They are hard to get. And when you get them, your hands are tied until the loan is paid off. With business loans, you can only get one at a time. So if your business grows and you need more money, you are out of luck.

If your biggest headache is slow paying customers, a better solution is to factor your receivables. Receivable factoring provides you the necessary financing to pay employees, suppliers and taxes. Above all, it provides you with peace of mind by eliminating (or at least minimizing) your financial worries.

Receivables factoring works on a simple premise. Your invoices are valuable assets that can be financed. Basically, the factoring company advances you money for your slow paying invoices and waits until your customer pays. Of course, they charge a small fee for this service. This is how it works:

1. You do your work, as usual. You bill your customer but then submit a copy of the invoice to the factoring company for financing
2. The factoring company provides you an immediate advance on 70% to 90% of the invoice (there is a 10% to 30% reserve). You can use that money to meet payroll and pay expenses.
3. The factoring company waits to get paid by your customer
4. Once they are paid, the transaction is settled and the factoring company rebates any reserves.

As you can see, factoring gives you immediate money for your slow paying invoices, enabling you to run and grow your business. Qualifying for factoring is really easy. The biggest requirement is to do business with credit worthy customers. So, if your customers are good (but slow paying), you can finance them.

Receivables factoring is a great tool to finance your business and grow it to the next level.

One of the challenges of looking for conventional business financing is that it can take a very long time to find out if you will qualify for it or not. Although there are no hard and fast rules, most companies report that it takes a couple of months to go through the process. It’s understandable that institutions take that long to reach a decision, they have to do a lot of due diligence to make sure they make a solid investment. At the very same time, the long application process also puts your company in the very tough position of waiting a long time to know if you’ll get financing – or not.

If your company needs financing quickly – or can’t qualify for a business loan – you should consider whether invoice factoring is the right solution for you. Factoring financing has been gaining traction, especially among companies that need flexible financing.

Factoring invoices provides a simple very proposition. It allows you to get a funding advance against your accounts receivable, providing you with working capital to pay employees and suppliers. So, instead of waiting 45 days to get paid by a client, the factoring company can give you a working capital advance. This provides the financial liquidity to meet your company’s current obligations and allows you to take advantage of new opportunities.

Factoring can be incorporated into most companies and works as follows. First, you deliver your product or service. Then you invoice your client. Now, instead of waiting to get paid, you send the invoice to the factoring company. In turn, the factoring company advances about 80% of the gross value of the invoice to you. Once your client pays the invoice, the factoring company advances the remaining 20% of the invoice to your company, less the financing fee.

Factoring costs can be higher than the costs of conventional products (e.g. business loans), which should be taken into consideration. Monthly fees can range from 1.5% to 3.5%, depending on the company’s industry, financing volume and other parameters. As a rule of thumb, factoring works best if a company has margins of at least 15% and customers that pay regularly. However, each business owner should evaluate whether factoring will work for the company.

There are some substantial advantages to using accounts receivable factoring. First, accounts receivable financing is easy to obtain. Second, it’s a flexible financing solution where financing increases are tied to your sales, making it an ideal tool for startups. And lastly, it can be setup quickly. Depending on your transaction, many times it can be financed in as little as 2 weeks.

Having liquidity – the necessary funds to pay suppliers, employees and regular business expenses is critical the success of a business. However, getting business financing has always been a challenging proposition for business owners. And given the current credit environment, obtaining a business loan is very hard. Banks and corporate finance companies are only providing business loans to large corporate clients that have substantial assets.

Liquidity problems are very common for companies that sell to other businesses. In the business to business environment, it is common to offer 30 to 60 days to pay an invoice, especially if your client is a large company. This creates a substantial cash flow problem, since you need to spend money to service your client and then wait to be paid.

There is an alternative. Let’s suppose that you could get 80% of your payment immediately upon delivering your product/service, with the remainder after 30 to 60 days. Would that help your business? Would that provide the necessary cash flow to pay rent, employees and suppliers? A more important question is, would you feel comfortable taking new business if you knew you would get paid quickly?

Accounts receivable factoring can provide the solution. The proposition is simple. You get an 80% advance on your invoices as soon as the work is completed. You receive the remaining 20%, less a small fee, once the invoice is fully paid.

One big advantage of factoring receivables is that it’s easy to obtain. The biggest qualification requirement is that you do business reliable customers. Aside from that your company must be free of liens and judgments. Generally, the set up process takes about a week and after that you can get funding within a business day of submitting a request.

Factoring rates vary and will be based on the quality of your clients and the amount of financing you need. Generally the monthly costs will be between 1.5% and 3% depending on these variables. As rule of thumb, factoring can work well if profit margins are at least 15%.

Receivables factoring provides a great solution for a specific problem – the gap generated between invoicing for services and receiving payment. If you have clients that take up to 60 days to pay, and you need financing to cover business expenses, factoring is a good alternative to conventional business loans.

Do you own a company that is growing quickly? If your company were a car, do you feel like you are pressing on the accelerator while at the same time stepping on the brake? Or worse, that your growth is stuck in neutral?

Slow cash flow is the biggest challenge to company growth. And business owners, like you, know that the biggest cash flow problem is having to wait up to 90 days to get paid by your commercial and government customers.

Going to the bank for a business loan won’t help much, unless your company has a great past history. This is because banks give business loans based on past performance. What you need is a financing product that can finance your company based on its future potential. And who better to evaluate your future potential than yourself? This is where receivables factoring can help you. This is because, receivables factoring is self-financing.

Receivables factoring, also known as invoice factoring, works by eliminating the 30 to 60 days it takes for commercial clients to pay you. It enables you to get a substantial portion of the money owed to you within a day or two of invoicing, providing you with funds to pay rent, meet payroll and more importantly – expand your business.

Imagine if you could get paid consistently, just two days after invoicing. How fast could your business grow? And without debt. This is how receivables factoring works:

1. You invoice your customers as you always do
2. You send a copy of your invoice to the receivables factoring company for financing
3. The factoring company advances you up to 80% of your invoice (20% is not advanced to cover potential disputes, etc.)
4. You get your money right away. The factoring company waits to get paid by your customer
5. Once your customer pays, the factoring company rebates you the 20% reserve, less a small fee

Factoring can be a very cost effective way of financing your business. The factoring fee is based on three factors:

1. The credit quality of your customer,
2. Your monthly volume and,
3. How long it takes customers to pay your invoices.

As a rule of thumb, monthly costs can go from 1.5% to 6% per month depending on these criteria.

If you own a company that has a lot of capital tied in slow paying receivables and if you need financing right away, you should consider factoring your invoices.