are the Key Elements to Invoice Factoring //
Businesses have used invoice financing for many years to quickly solve their cash flow problems. Businesses can quickly sell unpaid invoices to receive an advance capital. The money can then be used to address a variety of cash flow problems, including payroll and daily operating expenses as well as unexpected challenges and rapid growth.
It can be overwhelming to narrow down the list of factoring companies that are available to you to find the right one for your company. You want to partner with a factoring agency that is trustworthy and reliable, as well as offering support, transparency, and the most recent technology .
Our team of factoring specialists have compiled key information about invoice factoring and tips for choosing the right partner.
What is Invoice Factoring?
Invoice factoring is an alternative to traditional lending options. It involves just five steps once you have partnered up with a factoring firm.
Step 1: Invoice Factoring
Once your company has served its customer successfully, an invoice is sent to the customer for payment. Factoring is only available if the invoice is paid within 90 days.
Step 2: Invoice Factoring
The factoring company can then sell any outstanding invoices.
Step 3: Invoice Factoring
After verifying that the invoice is valid (the products/services have been delivered/performed), the factor will then provide an initial advance known as the “advance rate.” This rate typically ranges from 80% to 95%, but ultimately depends on the factor you choose, the size of the transaction, the strength and diversity of your customer base and your industry.
Step 4: Invoice Factoring
The invoice will then direct the customer to pay the factoring firm. The factor may also pursue collection efforts on your behalf if necessary.
Step 5: Invoice Factoring
After the factor has paid the invoice, you’ll receive the balance of the invoice, less any factoring fees.
Is factoring considered debt?
Invoice factoring does not require you to take out any debt. Factoring does not guarantee money that you will repay over a certain time period with interest. Factoring does not create new debt and is not a loan. To generate capital immediately, your business simply sells a valuable asset (invoices).
In fact, invoice financing can help your company eliminate debt, and not just avoid it. This financing tool allows you to access capital as well as flexibility to pay off debts and catch up on payments. You can rebuild your credit score by having the funds to pay for expenses and operate them.
How do I choose a factoring company?
Factoring may be the best option for your company. How do you choose the right factoring company? You need to understand your business, industry, and most importantly your customers.
These are the most important things to consider before you commit to working with a factoring firm.
Take into account the business needs
Numerous factoring companies offer services to many industries. Some industries have unique challenges, such as oil and gas, transport, and manufacturing. A factor that allows for flexible cash flow is necessary if your business has a significant gap between cash coming in and cash due.
A factor is essential if you are a founder of a startup. It will provide quick access to cash to pay payroll, sustain processes, and cover other expansion and rapid growth needs.
The financial stability of your customers
What are your customers’ payment habits and credit scores? Factoring invoices is mostly determined by the creditworthiness and financial stability of your customers. The amount and rate you receive could be affected by the financial stability of your customers. Consider the payment habits of your customers before you submit invoices to factoring. Are they usually on-time? Are they often late payers?
Terms and fees
Invoice factoring costs are determined by a number of factors. Your sales volume, industry and the other lending company you choose will all play a role in determining your invoice factoring cost. Reliable factoring companies offer low rates and competitive advances that will help small businesses grow. They also provide full support and transparency, with no hidden fees. Consider the cost of factoring before you sign up with one.
The flexibility factor allows:
It is crucial to ensure that the factoring company you choose has flexibility. Many factoring companies have long-term contracts with minimum monthly payments and other penalties. Factoring invoices can be a great way to help your business grow faster than it could on its own.
Reputable factor can also help you choose which invoices to factor, and assist with important back office tasks like tracking payment progress and maintaining records.
Invoice Factoring Services for Security Business Capital
Do you need an invoice factoring company that will be able to provide long-term, valuable relationships? Security Business Capital has a dedicated team of professionals. We are an industry leader in invoice factoring and have years of experience providing cash-flow solutions that allow businesses to grow.
Our team knows that cash flow increases are only useful if they are secured when you most need them. You can factor unpaid invoices with Security Business Capital and have cash in your hands in 24 hours. Take advantage of opportunities and manage unexpected costs to accelerate your growth.
Contact us today to receive a complimentary quote and/or consultation about our invoice factoring services.
Author: Justin Young
Justin Young HoneyHat™
