Short Term Capital by Invoice Factoring in 24 Hours.
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“Our company appreciates IFG's support and professionalism.”
Steven Howard
President of Industrial
Support Services
Benefits of Factoring
One of factoring’s more appealing features is the “use it as you need
it” funding option it provides. Most small businesses are
familiar with lines of credit—factoring, particularly invoice
factoring
operates in much the same way. Once a small business has been
approved by a factoring company—a process that is both quicker and
easier to qualify for than traditional bank loans—the business then has
the option to factor as many or as few invoices as they choose.
So what exactly is factoring? Factoring is one of the oldest and
most widely used forms of funding for businesses, standard receivables
factoring has been around for thousands of years. In practice it
works like this: A business fulfills a customer order. The
business then invoices the customer and sells this invoice (at a
discount) to a factoring company. The factoring company provides
the business with immediate cash in an amount equal to 80 or 90 percent
of the face value of the invoice. The customer then pays the
factoring company directly when the invoice is due. The factoring
company then remits the balance of the invoice amount to the business,
less their professional fees and interest charges.
During tough economic times, factoring can prove to be very effective
in speeding up cash flow. It provides numerous other benefits as
well. Businesses can pass off collections: Outsourcing your
accounts receivable management to another company (your factor) frees
up resources to focus on other more productive activities.
Business entrepreneurs can free up their working capital: Many
companies have the majority of capital tied up in inventory.
Invoice factoring is great for quick financing: Why? Because it does
not require a business plan or tax statements, plus factoring is a
quick form of cash often used for businesses that are experiencing a
cash crunch.
Many small businesses could stay afloat if their clients paid invoices
on time, so today’s economy is causing business owners to rethink their
operating strategies. Often firms don’t get paid immediately for
delivered products or services; however, in order to sustain and grow
their business, they need some cash on hand. That’s where single
invoice factoring can benefit businesses, and especially those who do
not get paid for 30, 60 or 90 days.
Factoring companies typically don’t expect to buy 100 percent of a
client’s receivables, so there are no minimum or maximum sales volume
requirements. Each invoice purchase is a separate transaction and does
not form part of a portfolio lending approach. The transaction is
modeled as a buy-sell transaction. It’s a great way to turn receivables
into cash. Each and every client’s circumstances will vary and so this
may have an impact on the fees charged.
Factoring is not for
everyone. First, the small business must be
engaged in B2B commerce, not B2C. Second, there are minimum
billing requirements for the small business. Most small
businesses qualify, however, in today’s current economic climate, these
minimums do tend to fluctuate. Third, factoring is not
cheap. The small business does pay for the money factoring
provides. Most often, these charges are manageable as the
interest only accrues for the 30 to 60 days it takes the client to pay
the factoring company. If your small business is in need of
immediate cash infusions, factoring may be your best option.
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