Receivables Factoring
What is Receivables Factoring?
Very simply, it is the practice of selling your invoices at a discount in exchange for immediate cash. It’s easier to obtain than a bank loan and provides immediate access to cash, usually within 24 hours. Factoring invoices to access immediate operating capital is a common business strategy and one of the fastest growing financial services in a rapidly changing global market.
More businesses fail due to lack of working capital and cash flow than for any other reason. Profits are often tied up in accounts receivable and inventory. Factoring is a simple, effective way of keeping your cash flowing by providing up to a 95% advance on the money owed to you by your customers.
Who Can Qualify?
Qualification for receivables factoring is easy as it is largely based on the credit worthiness of your customers, not your personal credit or the financial strength of your business. Services are available to nearly any business that invoices or extends credit to their customers for services rendered and/or products delivered. Both product and service based businesses benefit from these services.
• startup operations
• high growth companies with insufficient working capital
• businesses in transition – companies that have tripped their bank covenants
• companies experiencing a tough year companies going through a change of ownership
• companies who cannot acquire the funds they need from traditional lenders
How Does it Work?
As a client, you basically forward the invoices you usually issue to customers to the factoring company instead. The factoring company will then factor these invoices and pay you up to 95% of the value of your receivables. This is usually done on the same day the invoices are received. Payment is then processed done by direct wire transfer to your account.
Your customers will then remit their payments to factoring company. Once payment is received, the factoring company will complete the transaction by paying you the balance of each invoice immediately.
