![]() ![]() Is Invoice Factoring Right for Your Business? Most importantly, invoice factoring frees up the cash tied up in accounts receivables, so it makes cash flow more predictable. On the other hand, factoring is best for reducing the working capital cycle. Bank loans are usually best for one-off purposes, such as acquiring new equipment or funding fixed assets. ![]() ![]() Invoice factoring and term loans are more suited to some purposes than others. And you will repay that loan, plus the interest, in regular, equal installments. Once approved, the bank will advance you with a fixed amount of money. You also do not incur debt with factoring, so it does not show up on your balance sheet.Ī term loan is the typical business short-term loan that you would get from a bank. This means you get your money immediately rather than having to wait for 30, 60, or 90 days for the customer to pay. A factoring company buys your sales invoices from you, less a small finance fee. Invoice factoring is the financing of your accounts receivable (AR). If your business has invoices that are not only weighing down your balance sheet, but are costing you time, money and effort to collect, consider selling these invoices to an experienced invoice factoring company. You’ll want to understand what is factoring, what your role is, and how it will affect your customers.īy selling invoices, companies can focus on more important issues such as creating more products and finding new customers, rather than dealing with the frustration of chasing down payment from sales that have already been made. How Does Invoice Factoring Work?Īs you explore whether factoring invoices is right for your business, you’ll want to learn more about the process that is involved. We make sure your questions are answered and your needs are met quickly so you keep your focus on growing your business. The Universal Funding team takes great pride in helping businesses just like yours. Before approving you for accounts receivable financing, the factoring company will run a credit check and possibly contact references for your customers to ensure creditworthiness. The factoring company then assumes collection from your customers. If you choose to factor invoices, you need to find a factoring company and sell the face value of your customer invoices. When a factoring company reviews an application to determine the factoring rate, it takes into consideration variables such as: a company’s sales volume, the credit strength of its clients, payment cycle trends in your industry, invoice amounts, and overall climate of your industry. They will typically advance from 80 – 95% of your accounts receivable.įactoring rates can vary from below one percent to over five percent of the face value of the receivable. The factoring company buying the invoice will deduct its fee from your proceeds–Universal Funding’s fee can be as low as 0.55%. Once approved, you typically receive the funds within a few business days. With invoice factoring, also called accounts receivable financing, business owners are able to sell unpaid invoices for immediate access to working capital. Invoice factoring is a quick financing option for businesses who may be waiting for their customers to pay their invoices for 30, 60 or 90 days. ![]()
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