What is 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
Invoice factoring, also known as accounts receivable financing, is a method used by companies to free up capital that is tied up in customer invoices. In invoice factoring, one company agrees to provide payment in exchange for the outstanding invoices that another company is owed. In this way, the second company gains the money it needs to pay its employees, pay its bills, and expand its business. If a business needs to obtain owed money quickly, invoice factoring may be a viable option. Through invoice factoring, the company essentially sells the rights to outstanding invoices to another company for a rate that is less than the invoices are worth. In this way, the company selling the invoices gets a percentage of the amount owed on the invoice much sooner than originally anticipated. The company purchasing the invoices, on the other hand, makes a profit, as it waits for the invoices to be paid in full. When attempting to complete an invoice factoring agreement, the company purchasing
Factoring is an effective form of business financing in which you sell your invoices to a factoring company in exchange for immediate payment. It eliminates the 30 to 60 days that your customers take to pay your invoices and provides you with the working capital you need to run your business. Factoring invoices is simple and can be used by most businesses. Here is how it works: • You deliver goods / services to your client and issue an invoice • You sell your invoice to a factoring company, who immediately advances you the 1st installment. This will be between 70% and 90% of the gross value of the invoice. You usually receive the advance in as little as 24 hours • After 30 to 60 days, the invoice is paid by your customer and the factoring company advances you the remaining funds as a 2nd installment, less a small financing fee An important result of the using invoice factoring you will get predictable cash flow. Factoring eliminates the uncertainty of when you’ll get paid.
Invoice Factoring is a financial tool that speeds up the cash flow a company has available. No more waiting 30, 60 or even 90 days to get paid with invoice factoring. Factoring company purchases your credit worthy invoices at a small discount and convert your invoices (sales) into immediate cash. As you can see, invoice factoring keeps pace with your company’s business growth. In a competitive market it is vital that businesses have access to ongoing working capital as and when they need it without the need for constant renegotiation. In addition, there is no delay between issuing invoices to receiving funds since payments are made immediately with account receivable factoring. Calculate how much more profit you will have with money now and not waiting. You will find out that invoice factoring is your answer to freeing up your cash flow needs.
Business Invoice Factoring is the financial tool that speeds your business cash flow and helps you to avoid the problems that slow paying customers can create for growing companies. Receivables Factoring provides fast and reliable funding to companies who need increased cash flow to expand their business. To do this, Business To Business Capital Corp. will purchase your credit-worthy business accounts receivable at a small discount and fund you with immediate cash flow. Quite simply… business invoice factoring turns your accounts receivables into cash immediately You’ll get cash the day your product is delivered instead of waiting to be paid at a future date. Receivables factoring is not a loan. There is no debt repayment or compromise to your balance sheet. Invoice factoring allows you to use your accounts receivable to create cash for the growth needs of your company today.
