Factoring Made Easy
As a small business owner, you may find yourself periodically needing access to a little extra money in order to maintain cash flow, pay suppliers, meet salaries, and handle regular monthly expenses such as rent and utilities. Unfortunately, finding traditional business loan financing has become more and more difficult over the years. Banks just aren’t lending like they use to, and this is primarily due to the increased turbulence of today’s economy. To make things even harder, most traditional business lenders require good-to-excellent credit, need you to be in business at least two-years, and will require you to show a steady stream of revenue.
Because of this, factoring has been gaining in popularity as an alternative to conventional small business financing. Factoring is different than some traditional secured and unsecured business loans. This type of financing is obtained through private lenders and therefore requires different underwriting terms. Factoring uses your company’s accounts receivables as collateral, and does not require you or your business to have an excellent credit history. This working capital loan offers a fast approval and funding process.
If you feel factoring may benefit your company, you can read more about this option below or can get started easily using our big orange button above. Our business loan experts would be happy to explain all your working capital loan options in easy to understand language. This information can help you decide what's best for your company’s needs and will ensure you get the best rates and terms possible.
What is Factoring?
Invoice factoring is also known as debtor and asset financing, accounts receivables factoring, asset-based financing and invoice discounting. This financial tool is not a loan in the traditional sense of the word. Instead, this type of financing is an all-out sale of your company’s accounts receivables to an investment company (factor), in exchange for a lump-sum cash payment. When you sell your accounts receivables, the ownership of your invoices will be transferred to the purchaser. While your company's customers may never realize that the invoice has changed hands, the factoring company that has ownership of your invoices, will be the one to collect all payments due.
The Process of Factoring Your Company's Accounts Receivables
- Once an initial purchase of your invoices has been completed, the factoring company will advance 70 -to- 90 percent of the invoice’s value to your company.
- After all payments have been collected from your customers, and the invoice has been paid 100% in full, the remaining percentage not advanced initially, will be forwarded to you the original invoice holder.
- The factor will normally retain a small fee, or rebate, in the amount of 1.5-to-5 percent of each invoice for the advance. The cost your company will be charged depends on many factors including the age of the invoice and the likelihood your customer will pay on-time.
Additional Benefits of Factoring
For many business owners, having your customers pay you on 30, 60, or even 90 days terms can be frustrating. These extended payment terms can have a big effect on your company's cash flow. This lack of cash flow can hurt the day-to-day activities of your business and can even keep you from growing. Selling your accounts receivables can give your company the immediate access to cash it needs to operative efficiently. Factoring your invoices can also save you time, and the expense and aggravation of having to chase down your customer's payments.
We Can Help You Find The Best Factoring Companies
Although factoring is not the least expensive way to obtain the working capital your company needs, it is an option worth considering if you need money fast or have less than perfect credit. If you need working capital and are uncertain which type of small business financing is best for your company, contact us today. Our small business loan experts are always standing by ready to explain your choices without pressure or obligation to continue. At Life House Financial our services are free and there’s never any obligation to proceed if you are not completely satisfied with your small business lending options, including that of factoring.