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.

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.

Looking for a business loan but can’t find one? Or worse, has your loan request been rejected? One of the toughest jobs for business owners is trying to secure business financing. Unfortunately, getting a business loan isn’t always easy. Although most banks want to lend money, they have strict underwriting criteria that they must follow. This commonly includes asking for your company’s financial history and looking for assets. However – not all small businesses have long track records or tangible assets. Does this mean that you can get business financing? No – it just means that business loans may not be the best alternative for your company.

Does your company give its clients 30 to 45 days to pay invoices? Most companies that offer payment terms usually run into cash flow problems. This is because few businesses have the required cash cushion to wait 45 days to get paid. That forces owners to either juggle vendor payments – or worse – turn away opportunities. There is a solution for this problem. It’s called invoice factoring.

Suppose that instead of waiting 45 days to get paid, you were able to get 80% immediately and the remaining 20% in after 45 days. Would that work better for you? Of course it would. And you can achieve this by factoring your invoices. The biggest advantage of factoring is that you get an immediate advance on your invoices. This gives you funds you need to pay suppliers and employees. It also enables you to take advantage of new sales opportunities without having to worry about juggling vendor payments.

An accounts receivable factoring transaction works as follows. Once you deliver your product (or service) you invoice your client. At that point you also finance the invoice through the factoring company. The factoring company advances you 80% immediately. You get the remaining 20%, less a small factoring fee, once your client pays the invoice in full.

One advantage of working with factoring companies is that they look at businesses in a different way than banks do. They consider your invoices from solid paying clients to be your biggest asset. And as such, they are willing to advance money against them. Of course, factoring companies also look at other criteria. But the main criteria are to have good invoices.

Factoring can be used in many industries and has a number of sub-specialties. Freight bill factoring is a form of factoring that is common in the transportation industry. Construction factoring and medical factoring are used in the construction and medical industries respectively. Factoring financing is a flexible solution that can be used across many industries and can help position your company for growth.

Do you have clients that pay your invoices in 30, 45 or even 60 days? If so, then you are aware of how their slow can drain your working capital. Unless your company has a nice cash cushion in the bank, paying suppliers or even employees can become a problem.

Asking your customers to pay your invoices quickly will not help either. Paying invoices in 30 to 60 days is an industry standard. And, if you work with large or midsize companies, you’ll be expected to offer 30 days terms if you want to keep their business. There is no alternative.

So what can a business owner do? Going to the bank may help some, but not most. Before providing financing, banks will require that you provide them with three years of audited financials. They may also require that you have stellar personal credit. So if you cannot get a business loan, what other business financing options do you have?

Invoice financing, commonly known as factoring, is a option that is widely used by businesses, however it is virtually unknown to the general public. It gets your invoices paid in as little as 2 days, eliminating long payment periods. In the end, it provides you with predictable cash flow, enabling you to pay suppliers, employees and grow your business.

An invoice factoring transaction works as follows:

1. You deliver goods or services and invoice for them
2. You send a copy of the invoice to the factoring company, who advances you up to 85% as a first installment
3. You get the funds to meet business expenses
4. Once your customer pays for the invoice, the transaction is settled

The cost of factoring invoices, varies based on the commercial quality of your customers and the length of time that you need the money for. Generally speaking, the monthly cost will be between 1.5% and 3.5% for most accounts.

The big benefit of invoice factoring is that it is easy to obtain and can be set up quickly. On average, it takes about 5 days to obtain factoring financing. And once you get it, qualifying for line increases is very easy. All you need to do is increase your sales. Factoring is one of the few products that grows with your business.

Getting business financing is tough when the economy is doing well and almost impossible when the economy is doing badly. There is a reason for this, lending money to a business is considered risky, especially for financial institutions. This is why most institutions will ask for audited financial statements and will insist that your business must have good collateral. What qualifies as good collateral? Usually real estate, machinery and accounts receivable in some combination. Furthermore, institutions also want to see a multiyear track record in which your company shows substantial growth.

But – what if you own a startup? Don’t have hard collateral? Or, what if your business is in a turnaround situation? Usually, you’ll be out of luck. Fortunately, there are other options.

There are alternate business financing solutions that can work well in many instances. For example, let’s say that your commercial clients take 30 to 60 days to pay their invoices. This can create a challenge for most businesses. If you can’t get a conventional business loan, a good alternative is to use factoring. Factoring, which has been gaining traction recently, provides an advance against your slow paying invoices. It provides the working capital you need to pay business expenses and eliminates the timing challenges of waiting for payment.

Here is how it works. Let’s say that you sell a product (or service) and then invoice your client expecting payment in about 45 days. A factoring company can advance about 80% of what is due to you within days of invoicing. You get the remaining 20%, less a service fee, once your client pays the invoice in full.

Stated differently, you get about 80% soon after invoicing, and the remaining 20% (less the fee) once your client actually pays.

For most businesses, getting an 80% advance spells the difference between being able to run the company and going out of business. It provides the liquidity to pay employees and suppliers in a timely way. For many, it allows them to take new clients without worrying about their payment terms.

Factoring companies consider your invoices from good credit worthy clients to be excellent collateral. This enables them to advance money against them. Now, this does not mean this is the only criteria they will look at. Most factoring companies will want to make sure that your company is free of judgments, lawsuits and liens.

One critical advantage of invoice factoring is that it works very well for startups. Most factoring companies are happy to work with clients whose biggest asset is a roaster of good paying clients.

One of the biggest obstacles for small business growth is access to working capital. Companies that have access to business financing, are usually better positioned to take advantage of opportunities – and – better positioned to weather challenges successfully than those that don’t have it.

But getting working capital is a major challenge for most businesses, especially startups and small companies. Most will not be able to meet the requirements for a conventional business loan or line of credit. Plus, conventional business loans are usually offered to companies that have long track records of success and hard assets. Few startups and small businesses meet these criteria.

However, business loans are not the only way to finance a company. There are some alternate ways of financing that have started to gain popularity in the recent years. One alternative is called accounts receivable factoring, also known as invoice factoring.

Invoice factoring solves a very simple but common problem. Most companies that sell to other businesses have to wait 30 to 60 days to get paid. However, few can afford to wait that long. This is a major problem for small companies that don’t have a strong balance sheet and need funds to pay suppliers and employees. Factoring provides an advance against your slow paying invoices and gives you the working capital to pay employees and suppliers. It puts you on a stronger financial footing, enabling you to take on new businesses without worrying about payment terms.

A factoring transaction works as follows. First you deliver your product/service and invoice the client. Then, the factoring company advances you up to 80% of your invoice. This is your first installment. Your company gets the remaining 20%, less the service fee, once your client actually pays for the invoice.

So the benefit is simple. You get 80% upfront and the rest once your client pays.

Invoice factoring is a great solution if your cash flow is not predictable and if you can’t afford to wait 30 to 60 days for your invoices to get paid. It provides you with predictable cash flow, providing you with another tool to grow your company.

For product distributors, cash flow is always a big concern. Unless you have been in business for a long time, most suppliers will insist that you pay them soon after delivering the goods. Or worse, prior to delivery. However, most of your clients will insist in paying your invoices on net 30 or net 60 days. This creates a simple problem – you have to pay suppliers quickly, but clients pay slowly. Although your business may be profitable, unless you have adequate working capital, you will have cash flow problems.

When faced with a cash flow problem, most business owners try to get a business loan. Although business loans can work well in many situations, they can be inflexible especially if your business has growing capital needs. Also, qualifying for a business loan can be difficult since institutions usually require substantial collateral and track records showing profitable operations for many years. This makes them a tough option for new or small businesses.

But there are better solutions though. Let’s examine the situation. The problem is the time delay between having to pay your supplier and getting paid by your client. What would happen if you could reduce the time delay? For example, let’s say that your client paid you in two business days rather than two months. Would that solve your cash flow problem? For most, it would.

You can achieve just that by using invoice factoring.

The value proposition of invoice factoring is simple. It reduces the time delay between delivering goods and getting paid. This puts your business in a better cash position and enables you to take on new opportunities.

Factoring involves selling your invoices to a factoring company. The factoring company buys your invoices in two installments. In the first installment, you get 80% of the invoice advanced to you. You get the remaining 20% (less a fee) as a second installment, once your client actually pays for the goods.

One of the advantages of factoring accounts receivable is that is a very flexible solution, where the maximum amount you can finance is mostly determined by the ability of your clients to pay your invoices. Said differently, your factoring financing line is tied to your sales and grows with your sales. Because of this, small companies that do business with large credit worthy clients can benefit from using factoring.

Small business owners have always had a tough time obtaining financing. Simply, most small businesses just can’t qualify for conventional business loans. The requirements are too onerous – the company must have sizable assets, multiple years of profitability and many times, it’s financial statements must be audited by a 3rd party.

Most business owners consider that a business loan is their only business financing alternative. When they get turned away, they give up any hope of obtaining financing. What most small business owners don’t know is that they do have alternatives – and – many times those alternatives can work better that conventional financing.

Let’s take a common cash flow challenge. Companies that sell products or services to other businesses usually have to wait between 30 and 60 days to get paid for their services. So, they incur the expenses of delivery immediately, but then wait a long time to recoup their investment. While this is fine for companies with adequate banking reserves, it is one of the major challenges that business owners face today. As a matter of fact, few startups plan for the fact that it takes 4 to 8 weeks to get paid, which not only limits their growth opportunities, but challenges their very survival as a business.

Now, most business owners would consider that the only solution to the previous problem is to get a loan or a line of credit. But there is another option – it’s called factoring financing. Few people have heard of it, so not many owners consider it if they fail to get a business loan.

Invoice factoring offers a very simple solution to the slow payments problem. Let’s say that you sold $10,000 worth of consulting services to a company. And let’s say that they’ll pay the $10,000 in about 45 days, which is the industry average. Now, what happens if you can’t wait because you need to meet payroll or make supplier payments? Well, you could sell the invoice to a factoring company. The factoring company would buy it from you in two installments. The first installment would be for 80% of the invoice, or $8000 in the case of our example. This is paid at invoicing.

The second installment, paid to you when your client actually pays the invoice, is the remaining 20%, less a fee. Using our example, it’d be $2000 minus the cost of the factoring service.

So factoring invoices offers you the following proposition: an immediate advance of about 80% at time of invoicing, and a second advance for the reminder (less fees) at the time of actual payment.

As you can see, factoring provides the needed working capital to meet business expenses without worrying about when your client will pay. It provides you with predictable cash flow, positioning your business for growth. And qualifying for factoring tends to be relatively easy. The biggest requirement (though not the only one) is that you must have a good roster of clients.