Factoring

Factoring is a form of financing that isn’t a loan. Instead, factoring allows you to sell accounts receivable to an agent for a lump sum. Then, the factoring agent collects repayment from the client who owes on the account.

What is Factoring?

There’s often a waiting period between the delivery of goods and services and when a client makes payment. While you’re waiting for the invoice to be satisfied, business expenses continue to come due. Utility bills, incoming supplies, and payroll still need to be met and can’t be put off until all of your invoices have been paid.

You can utilize accounts...

receivable, contracts, purchase orders, and invoices to improve cash flow by selling them to a factoring agent. The agent essentially pays off the outstanding balance, minus a factoring fee, in advance of the client. Then, the agent collects their repayment from the clients who owe on the account. In most cases, financing is decided based on a client’s ability to pay. However, if the client refuses payment or requests a return, the business must return the money to the factor.

What is Factoring?

There’s often a waiting period between the delivery of goods and services and when a client makes payment. While you’re waiting for the invoice to be satisfied, business expenses continue to come due. Utility bills, incoming supplies, and payroll still need to be met and can’t be put off until all of your invoices have been paid.

You can utilize accounts receivable, contracts, purchase orders, and invoices to improve cash flow by selling them to a factoring agent. The agent essentially pays off the outstanding balance, minus a factoring fee, in advance of the client. Then, the agent collects their repayment from the clients who owe on the account. In most cases, financing is decided based on a client’s ability to pay. However, if the client refuses payment or requests a return, the business must return the money to the factor.

Purchase Orders

Many governments and businesses use a purchase order to request goods and services. Factoring a PO can help bring in the materials needed to satisfy the order.

Invoices

After receiving promised goods and services, a client usually has 30-90 days to submit payment for them. Factoring brings in cash right away.

Contracts

If you have clients with a reputation for paying on time, you may be able to sell those contracts to bring in regular income for your business.

Advantages of Factoring

01

Factoring is not considered a debt.

02

Factoring is based on sales rather than the company’s net worth.

03

Funds can be received in a matter of days, not weeks.

04

A factor examines the client’s credit history, not the borrowers.

FAQ

When is factoring not a good fit?
Companies that don’t have clients with a strong credit rating or don’t have accounts receivable may wish to explore other financing options.
Does a factor talk to my clients?
If client contact is a concern for you, we can help you find a factor that minimizes or functions without contacting your business’s clients.
What happens if my client doesn’t pay?
A non-recourse factoring agreement is one where your business is protected from liability if your client doesn’t satisfy their debt. A recourse agreement allows the factor to recover their payment by seizing a business or personal asset from you. Both types of agreements are available through our network.
How much can I factor?
Factoring can bring in as much as 96% of the account value. When the client pays the factor, the excess funds get returned to your business.