Accounts receivable factoring, commonly called factoring, is a financial tool that is designed to help small and medium sized companies that have cash flow problems due to slow paying customers. Offering payment terms of 30 to 60 days is very common and actually expected in most commercial transactions. The problem is that many companies can’t afford to offer terms and only do so to keep their customers. This puts them in a financial bind where they end up walking on a tightrope trying to balance revenues and expenses. This where factoring comes in. Factoring can accelerate your revenues, streamlining your cash flow and reducing (or even eliminating) the liquidity problems created by slow paying customers.

Invoice factoring provides a very simple proposition – a factoring company advances funds against your slow paying invoices and keeps the invoice as collateral until it’s paid. Your company gets immediate funds, enabling it to pay expenses and follow new opportunities. The transaction is settled once your customer pays the invoice in full.

One major advantage of accounts receivable factoring is that it’s easier to get than most business financing solutions – and much faster to set up than a business loan. To qualify, you will need to have invoices that are payable by customers with strong credit. But aside from that, the only other major requirements are to be free of legal and tax problems. This makes this form of financing very accessible to small companies.

One important advantage of accounts receivable factoring is that is directly tied to your sales. And the size of your line is tied to the credit worthiness of your customers. Because of this, accounts receivable factoring is very dynamic and can grow easily to accommodate your sales growth.

When it comes to business financing, one of the most undeserved markets is the “very small” business market – especially companies with revenues that are less than $50,000/month. There are a few reasons why this market is undeserved.  For many financing companies, these small accounts don’t generate enough revenue to make it worth their while. Additionally, many consider them to be riskier because small companies usually don’t have the management, systems, and client base that larger companies do.

On the other hand, this market has created an opportunity for accounts receivable factoring companies that want to specialize in it. Small business factoring, as it is commonly known, is a modified version of factoring that is designed to work with small businesses. They key is to provide a more personalized service, enabling the business owner to focus their efforts at growing their business. For example, few small companies have dedicated departments (or even dedicated employees) to handle invoice tracking, verification and collections. Many companies that specialize in small business factoring have dedicated staff that will help the owner with these tasks.

One advantage of small business factoring is that it’s easier and faster to obtain than most conventional financing plans.  To qualify, the company needs to be in good legal standing, have no liens/judgements and have customers with solid payment tracks. This makes small business factoring an ideal solution for small companies with aggressive growth plans.

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.

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Learn about factoring in West Virginia and Wisconsin factoring

Managing your company’s cash flow can be a tedious but critical task. If you operate your business like most other managers, you probably pay your supplier invoices in about 30 days. Likewise, your clients probably pay your invoices in about 30 days as well. The problem, of course, is that this process seldom works like clockwork. Inevitably, this leads to cash flow problems.

Experts recommend that company’s keep enough funds to cover about 5 months worth of operating expenses . This works very well in theory, but is almost never done in practice. Few small and midsized companies have the resources to keep such a large cushion of funds at the bank. Many companies, especially small businesses, operate at the edge and have less than 4 weeks worth of operating expenses set up as a reserve. This can create a critical situation should cash flow problems arise.

One way to solve this problem is to get business financing and use it to use it as a reserve. Getting a business loan can be a major challenge for small companies who lack the assets to qualify. Most conventional business loans require a rigorous due diligence and can take months to close.  However, if the company has cash flow problems, a better solution could be to use accounts receivable factoring.

Accounts receivable factoring allows you to convert a large portion of your accounts receivable into cash very quickly.  This provides the funds you need to pay suppliers and smoothes out your cash flow by accelerating receipt of funds. Factoring works by having an intermediary factoring company advance funds against your invoices while they wait to get paid by your client.

One advantage of working with factoring companies is that they focus mainly on the credit quality of the receivables they finance.  They consider accounts receivable to be the most important collateral. This makes accounts receivable factoring and accessible solution to many small and mid sized companies.

Accounts receivable factoring is an ideal solution for companies whose biggest challenge is that they cannot afford for their clients to pay their invoices.

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Learn about factoring in Tennessee and Texas invoice factoring

Finding the right business financing solution for a company can be a major challenge, even for seasoned professionals. Each financing solution has benefits and drawbacks and knowing which solution to deploy is critical. Deploying the wrong solution can have long term negative consequences for your company, dragging down growth.

One specific challenge stems from selling products and services to other companies on net 30 terms. This can be a problem because most companies incur a number of expenses before delivering their product or services. Waiting an additional 30 to 60 days to get paid increases the gap between spending funds and receiving revenue. This forces the company to dip into reserves to pay for operations.  There is no problem with this strategy as long as the company has sufficient reserves. However, the company can get into problems very quickly if the reserves are exhausted.  Interestingly, this can happen from a seemingly positive event, such as winning a large sale or project.

There is a specific business financing solution for this type of problem. It’s called accounts receivable factoring and it works by providing your company with a quick payment on your net 30 to net 60 invoices. The quick payment reduces, or eliminates, the gap between expenses and revenues. This puts your company on a solid financial footing, providing a platform for sales growth.

Qualifying for receivables factoring is usually easier than qualifying for a small business loan. Most factoring companies are more interested in the quality of your receivables than anything else since that is the collateral that secures their transaction. Thanks to this approach, small and medium sized companies with few assets other than a strong list of clients can usually qualify.

Accounts receivable factoring integrates fairly easily into most companies and works as follows. Once your company completes the work, you send a copy of the invoice to the factoring company. The factoring company gives you the first advance on the invoice which is about 80% of the face value. Once your client actually pays the invoice, the factoring company remits the second advance, which is the remaining 20% less the financing fee.

This type of financing lends itself well to certain industries. For example, staffing, security and transportation factor receivables as a way to ensure they have funds to meet operational expenses. companies commonly

Invoice factoring has been gaining popularity as an alternative to conventional business loans,  especially for startup, growing and distressed companies.

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Information about factoring in South Carolina and South Dakota invoice factoring.

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 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, small business 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.

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Learn about factoring in New York and invoice factoring in North Carolina.

There is nothing more frustrating to a business owner that having to turn away sales because they lack the cash flow to support them. For companies that sell products, this means not being able to replenish inventory in time to capitalize new opportunities. For companies in the service industry, this means not being able to pay the additional employees (or hours) to cover additional service requests. This problem is fairly common, especially for small and midsized businesses.

There are many things that can cause cash flow problems. The most common problem is a simple one: timing. The timing of the revenues does not match the timing of expenses. For many companies, expenses come before revenues. For example, a product supplier buys inventory (an expense), sells it on net 30 terms and then collects revenues 30 days later. Likewise, a staffing agency can place employees, who must be paid weekly but then bills the client on net 30 terms. Again, they wait 30 days before being able to collect the revenue. Unless the company has a capital reserve to operate the company and grow while waiting to be paid, it will run into problems.

The solution to this problem is fairly simple. The right business financing solution can fix it. The problem is that getting a business loan can be very difficult for small companies. They require substantial documentation and collateral. And many times, they can take a long time to close as the institutions credit committees review the cases. There is an alternative solution that can work better than a small business loan – especially if your challenge is that you cannot wait 30 to 60 days to get paid by clients. It’s called factoring financing.

Factoring is a very different than conventional business loans. With factoring, you get an advance for your outstanding invoices. This is the equivalent of a quick pay. This helps correct the timing problem between expenses and revenues and provides your business with the cash flow to support existing operations and new sales.

Most factoring companies don’t lend money, rather they buy the financial rights to your invoices. Their most important consideration is your clients’ ability to pay the invoice in a timely fashion. This makes invoice factoring accessible to companies who don’t have substantial assets but do have great clients. However, the credit quality of your invoices is not the only qualifying consideration of a factoring company. Your business must also be free of judgments, lawsuits and liens.

Factoring transactions tend to be structured as a sale with two installment payments. The first installment is usually 80% of the invoice value and is given to you as soon as the invoice is sold to the factoring company. The second installment, usually 20% less the financing fee, is given as soon as your client pays for the invoice.

Small business factoring integrates quickly into most organizations and it has a very specific scope: it is designed to solve the cash flow constrains generated the timing discrepancy between expenses and revenues.

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Information about factoring in Iowa.

Most companies are able to finance operations and growth by using their own funds or by having the owners make additional capital contributions. Some companies do this by choice – they dislike the idea of getting business financing. Most companies, though, do so because they have no other choice. They just cannot obtain conventional business financing.

Many companies that run into cash flow problems do so because there is a timing gap between expenses and revenues. Usually expenses are immediate, but revenues are delayed for 30 to 60 days. Revenues are usually delayed because of the common practice of offering net 30 payment terms to clients. This timing gap can affect the availability of funds for other projects or worse, may force the company to delay certain critical payments.

One possible solution is to use a business loan (or line of credit) and use it to cover expenses when available funds are low. However, business loans are usually hard to obtain and can have inflexible limits. Furthermore, the loan application process can require that you provide the institution with substantial documentation and can take a long time to close. Many times, a better solution is to use receivables factoring to accelerate your revenues.

Factoring accelerates your revenues by providing your company with an advance for your net 30/60 invoices. This provides the necessary funds to cover operating expenses. The accelerated cash flow strengthens your company’s financial position enabling you to capitalize on new opportunities.

Qualifying for accounts receivable factoring is relatively easy since the main collateral are your invoices, which are backed by the reputation of your clients. It’s also more flexible than other forms of financing since it’s dynamic and moves in parallel with your billings. This enables your financing to grow, as your company grows. Accounts receivable factoring is an ideal solution for companies in the staffing , services, manufacturing and transportation industries.

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Learn about factoring in Indiana.

Managing your company’s cash flow can be a tedious but critical task. If you operate your business like most other managers, you probably pay your supplier invoices in about 30 days. Likewise, your clients probably pay your invoices in about 30 days as well. The problem, of course, is that this process seldom works like clockwork. Inevitably, this leads to cash flow problems.

Experts recommend that company’s keep enough funds to cover about 5 months worth of operating expenses . This works very well in theory, but is almost never done in practice. Few small and midsized companies have the resources to keep such a large cushion of funds at the bank. Many companies, especially small businesses, operate at the edge and have less than 4 weeks worth of operating expenses set up as a reserve. This can create a critical situation should cash flow problems arise.

One way to solve this problem is to get business financing and use it to use it as a reserve. Getting a business loan can be a major challenge for small companies who lack the assets to qualify. Most conventional business loans require a rigorous due diligence and can take months to close. However, if the company has cash flow problems, a better solution could be to use accounts receivable factoring.

Accounts receivable factoring allows you to convert a large portion of your accounts receivable into cash very quickly. This provides the funds you need to pay suppliers and smooths out your cash flow by accelerating receipt of funds. Factoring works by having an intermediary factoring company advance funds against your invoices while they wait to get paid by your client.

One advantage of working with factoring companies is that they focus mainly on the credit quality of the receivables they finance. They consider accounts receivable to be the most important collateral. This makes accounts receivable factoring an accessible solution to many small and mid sized companies.

Accounts receivable factoring is an ideal solution for companies whose biggest challenge is that they cannot afford for their clients to pay their invoices.

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Learn about factoring in Colorado.

Most companies that have weathered the recession have been left in a shaky financial position – where that can’t completely capitalize the current economic recovery. For many companies, cash flow has degraded to the point where they are living from client payment to client payment. For example, most commercial invoices used to get paid in 30 days. Now it usually takes 45 to 65 days to get paid. Sometimes even longer.

Although payments seem to take longer to come by, expenses seem to pile on very quickly. You have suppliers to pay. Payroll. Utilities. Office expenses. And the list goes on. This creates a serious gap in your company’s cash flow. And this gap can prevent your company from growing once the economy improves and sales start increasing.

One way to fix this problem is to ask clients to pay their invoices faster. However, this seldom works as most clients are paying slowly because they have problems of their own. The alternative solution is to get business financing. Few companies are able to obtain business loans in the current environment though. Institutions are only lending money to companies that have impeccable financial statements, substantial assets, years of experience and well seasoned management. And even if you meet this criteria, qualifying for a business loan is far from certain.

A third approach is to fix the cash flow problem using accounts receivable factoring. This solution reduces the cash flow gap by financing your invoices, and therefore reducing the amount of time it takes you to receive payments. The transaction uses a third party financing company referred to as a factoring company.

The transaction mechanics are fairly simple. Once you have an invoice from a credit qualified client, you sell it to the factoring company, which pays you for it in a few days. The factoring company will buy your accounts receivable in two payments. The first payment is usually for 80% of the invoice. You get the remaining 20%, less a factoring fee, once your client pays the invoice in full.

Qualifying for accounts receivable factoring is easier than qualifying for conventional business financing. The most important requirement is that your clients need to have solid commercial credit.

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Learn about invoice factoring in Alaska.

Finding the right business financing solution for a company can be a major challenge, even for seasoned professionals. Each financing solution has benefits and drawbacks and knowing which solution to deploy is critical. Deploying the wrong solution can have long term negative consequences for your company, dragging down growth.

One specific challenge stems from selling products and services to other companies on net 30 terms. This can be a problem because most companies incur a number of expenses before delivering their product or services. Waiting an additional 30 to 60 days to get paid increases the gap between spending funds and receiving revenue. This forces the company to dip into reserves to pay for operations. There is no problem with this strategy as long as the company has sufficient reserves. However, the company can get into problems very quickly if the reserves are exhausted. Interestingly, this can happen from a seemingly positive event, such as winning a large sale or project.

There is a specific business financing solution for this type of problem. It’s called accounts receivable factoring and it works by providing your company with a quick payment on your net 30 to net 60 invoices. The quick payment reduces, or eliminates, the gap between expenses and revenues. This puts your company on a solid financial footing, providing a platform for sales growth.

Qualifying for receivables factoring is usually easier than qualifying for a small business loan. Most factoring companies are more interested in the quality of your receivables than anything else since that is the collateral that secures their transaction. Thanks to this approach, small and medium sized companies with few assets other than a strong list of clients can usually qualify.

Accounts receivable factoring integrates fairly easily into most companies and works as follows. Once your company completes the work, you send a copy of the invoice to the factoring company. The factoring company gives you the first advance on the invoice which is about 80% of the face value. Once your client actually pays the invoice, the factoring company remits the second advance, which is the remaining 20% less the financing fee.

This type of financing lends itself well to certain industries. For example, staffing, security and transportation companies commonly factor receivables as a way to ensure they have funds to meet operational expenses.

Invoice factoring has been gaining popularity as an alternative to conventional business loans, especially for startup, growing and distressed companies.

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Learn about factoring in Idaho.