Financial Factoring Frees Up Cash Fast

Financial Factoring

Since factoring companies aren't financial institutions, they don't require the strict guidelines imposed on banks and other lending establishments.

While financial factoring companies are merely buying invoices from you at a discount off the face value, banks actually loan you money based on your collateral. Since banks are heavily regulated, they must review your financial statements, take into account how long you've been in business and determine the equity in your company before they can decide if they can loan you money. This process makes financial institutions far less flexible than financial factoring companies.

Since the decision to buy invoices from you is in the hands of the individual financial factoring company, they can often provide funding in less than 2 days which is unheard of if you were to try and get a business loan from a bank.

The primary consideration for the factoring company in determining if they want to purchase your accounts receivable is whether or not your customers are credit worthy. They don't want to buy invoices from you if there is virtually no chance of collecting on them.

If they decide to buy your invoices, they will promptly pay you a good portion of the face value of the receivables. Once your customers have paid the factoring company for your invoices, the financial factoring company will pay you the balance of your funding - after they take out the discount you agreed on.

If you want to check to see if your receivables qualify to be factored, take the time to fill out a brief online factoring form.

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  • Article Updated
    Jan 27, 2020
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    I first considered AR Factoring when our business ran into a cash flow snag. Payroll was due in just 3 days and all of a sudden our largest customer adopted a "new policy" to pay our invoices no sooner than 54 days after they had been billed. And that was compounded by the fact that we had already paid our staff for the previous 30 days they had been working in order to meet the "deliverable" we had agreed to!

    Roger H.

    Ours was a small service business with about 20 employees. It sure was a relief to pay employees and vendors promptly - even while we were getting poor treatment from our big customers - invoice factoring was a great solution for us.

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