Factoring is when the accounts receivable invoice are sold by your business to a factoring company. This is often suggested as a factor. The banks traditionally need a lot of approval process to loan money. The loan will have interest rates and results in debt for a business. Reputable factors start approval within 24 hours. It provides same-day funding for up to ten days. For a new client without subjecting your business to the banking interest rates. This will avoid debt on your company’s books.
The companies that enjoy the long term factoring financing. That includes those that are facing business scenarios for example:
- Volatile cash flow
- Slow-paying customers (government agencies, large corporate buyers, seasonal sales)
- Long duration sales cycles
- Funding to maintain the inventory for production
Factoring helps your business grow. Your company is presented with great opportunities such as:
- Innovations offer a chance to invest in new equipment, technology, and inventory warehousing
- Timely opportunities
- Urgent customer demand for services or products
When the company is facing short term business operations because of the cash flow. The factoring can resolve for the following:
- Payroll funding needs
- Operating losses
- Maxed out lines of credit cards
Comparing Factoring loan to Bank loans
A florida factoring company can give an approval process that starts within 24 hours. The long and evaluating process of applying for any traditional bank financing. Is flexible and well-positioned to give funding with necessity. The diligence for factoring funding focuses on the health of the customers. While the bank analyzes the pros and cons of a company’s assets, creditworthiness, and net value. The great news is that the funding provided by a reputable factoring company. It happens within 3 to 10 business days of a signed agreement for a new client. The existing client can receive the funding on the same day.
The advantage of factoring it has money in hand. It is also fast and efficient from sending an invoice to the factor. Instead of bank business, you will wait for 30 to 90 days for the customer’s payment.
How factoring can provide security for business finances and accounts receivable management?
The factor advances 70% to 90% of the amount of the invoice to your business. Before the confirmation of your billed customer’s credit. And once your customer pays the invoices in full then the factor pays your company the balance. Because of the invoice after having any costs for the transaction.
To have the interest from the advantages of receivables financing. The factoring agreement between your company and the factor will define terms and collect charges such as:
- The factoring or discount fees that are based on the percentage rate of the value of the invoice accounts receivable
- The duration of the factoring arrangement
- Charges and fees to cover costs for management of the factoring arrangement
- The largest amount of funds available to advanced
The factoring agreement with a credible factoring company. That can provide your business with more valuable benefits.
- Collection of receivables
- Maintenance of accounts such as ledger
- Accounts receivable credit protection