Invoice Factoring Company

How Invoice Factoring Works

Can?t afford to wait 30 to 60 days to get paid by your clients? If you are like most business owners, waiting to be paid can be very challenging. In some cases it can mean lost opportunities. It can mean that you don?t bid for big sales because you know you won?t be able to play the waiting game. At its worst, it can spell disaster. It can mean that you need to delay payroll. It may mean that you don?t pay rent or taxes. It may force you to shut down your business.

If you are like most business owners, your first reaction will be to call your banker. Unfortunately, banks will not lend money to businesses that are new, have no hard assets or don?t have three years worth of profitable financial statements. At this point, most business owners give up, thinking that they don?t have any other options. However, they do.

If your company sells products or services to large credit worthy companies, you could qualify for invoice factoring financing. Invoice factoring reduces the time it takes for you to get your money to one day. How quickly could you grow your business if your invoices were paid in 24 hours?

As opposed to bank loans, factoring companies do not require hard collateral. The only requirement is that you have invoices form credit worthy clients. Factoring companies work differently than banks. A factoring company will provide you with financing based specifically on your invoices. This means that if your invoicing grows, your financing also grows.

Invoice factoring is very simple:

1. You generate invoices for your products or services
2. You submit the invoices to your clients and to the factoring company
3. The factoring company advances you up to 85% of the gross value of your invoices (the remaining is kept as a reserve to offset disputes)
4. Once the invoice is paid by your client, the factoring company releases the 15% reserve and charges their fee

Factoring financing is easy to qualify for and can virtually eliminate the 30 to 60 days it takes for your customers to pay. It provides you with the necessary working capital to grow your company and take new opportunities.

About Invoice Factoring Group. Need to receivables factoring? We can provide you with a factoring, invoice factoring or accounts receivable factoring quote for free. Marco Terry, the president, can be reached at (866) 730 1922 or at http://factoring.qlfs.com

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How factoring your invoices can help your business grow

Every day many business owners hit a wall. That wall prevents them from growing their business, or at least, severely limits the speed at which they can grow their companies. Sometimes, and especially for small and mid size businesses, the wall appears to be insurmountable. That wall is lack of working capital. Let's take a look at the most common source of working capital problems: extending payment terms to customers.

There are few things that small business owners hate to hear more than a customer utter the words, "We'll be happy to do business with you. However we pay net 45 days". As is well known, commercial clients like to pay their invoices in 30 to 45 days. As a business owner, you are expected to go through the trouble and expense of delivering your product or service on time... only to then wait 30 to 60 days to get paid.

It does not take a long time before the business has a lot of money tied up in their unpaid invoices - or accounts receivable. At this point the business may have more money in unpaid invoices than actual cash in the bank. When they reach the breaking point, they hit the wall. They can no longer supply new products until old invoices pay. Sometimes it's even worse. The business may stop operating until old invoices pay. Payroll is missed. Key suppliers are not paid. Unless this is fixed quickly, the business will certainly face major problems. If you hit the wall, there are two options. Either you step on the brake and stop growing your business, which means your competition gets the contracts, or you blast through the wall using some form of financing. Invoice factoring can help you do just that.

Your unpaid invoices are an asset - really!

Companies that hit the wall have a great asset that can be turned into immediate funds. They just don't know it. This asset is their unpaid invoices from credit worthy clients. Let me give you an example. Let's say that you have a $10,000 invoice from General Electric payable in 45 days. Do you think GE will pay? Isn't that invoice almost as good as money? Well, of course. GE is arguably one of the best and most financially stable companies on the planet. Most people would certainly consider that invoice to be "almost cash". Unfortunately, banks will seldom provide you any financing that relies on that "almost cash". However, there is a solution that relies solely on the power of your unpaid invoices. It is called factoring.

Invoice factoring. Financing your business without debt

Invoice factoring allows you to turn your slow paying invoices from good customers into immediate cash. It's a very simple transaction in which you trade an invoice - "almost cash" - for actual cash. Basically, the factoring company provides financing solely on the power of your soon to be paid invoices.

Provided that you have good customers, you can repeat this process for every invoice you have, almost indefinitely. If you sell products to good credit worthy customers, a factoring company will gladly buy your invoices. There are no limits, except how much you can sell.

One important thing to know about factoring is that it doesn't generate debt. The factor does not loan you money for your invoices. It buys them outright from you at a small discount. Since factoring is not a loan, qualifying for it is easy and your financial statements look cleaner. You just need a well-run business and great customers.

Who is a good candidate for factoring?

Factoring is a great resource for companies that have great paying - albeit slow paying - customers. To work well, the company should have profit margins of at least 15%. However, higher margins of 25% - 50% are more desirable.

Factoring works well for companies that have hit the wall and are turning away new business opportunities because of lack of money. In these instances, factoring will almost always allow you to grow your company immediately and will more than pay for itself.

Factoring works well for almost any industry. Some very successful staffing companies, trucking companies, IT consultancies, construction firms, manufacturers and service providers have used factoring to dramatically grow their businesses.

A sample factoring transaction

Let's take a look at a sample invoice factoring transaction. This will help you better understand how this financial tool works. Let's say that you have a company, called Super Services Inc. Super Services sells products to two clients. The clients are Company A and Company B. The factoring would look as follows:

1. Super Services delivers its products to Company A and Company B 2. Super Services sends Company A and Company B an invoice for its products. At the same time, it sends copies of the invoices to factor 3. The factoring company receives the invoices and advances funds to Super Services. Super Services can use the funds to grow the business 4. The factoring company waits to get paid. Once it gets paid, the transaction is settled

As you can see, invoice factoring is a fairly straightforward tool that allows business owners to capitalize on their most precious asset - their invoices.

Invoice Factoring Group

Invoice Factoring Group and its small business invoice factoring subsidiary can provide you with factoring quotes at no cost to you. Marco Terry, its president, can be reached at 866-730-1922.

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What is Factoring and Invoice Discounting?

Factoring and invoice discounting (known as debtor finance) can dramatically improve your cash flow by releasing money as soon as you have completed an order and raised an invoice rather than having to wait for your customer to pay. This makes them ideal for funding growth. Because it's linked to sales, factoring or invoice discounting is ideal if your business does not have the financial track record or security available to negotiate sufficient overdraft facilities.

A key advantage is flexibility. The amount you can borrow grows in line with sales and it is often possible for you to repay bank facilities and release previously pledged security.

Typically, when factoring is set up you can borrow about 80% of the value of your approved invoices less than 90-120 days old. Thereafter, cash will be made available against invoices on a daily basis with the remaining 20%, less charges, once the value of the invoice has been collected. Once the system is established, the level of advance you receive against invoices depends on a number of issues, but can rise as high as 100%.

Once in place, there is no limit to the amount you can borrow as the finance is linked directly to sales. This is in sharp contrast to bank overdrafts, which require regular re-negotiation and arrangement fees.

The cost of such a facility is normally up to 3% over base rate for the money borrowed together with a service charge linked to gross turnover of at least 0.5% depending upon the level of annual sales, the number invoices raised and how many live accounts are on the sales ledger. Small addition charges are often made for extra services such as credit insurance.

John Courtney AIMC, MABS, MInstDis, is the managing director of Strategy Consulting Limited (http://www.strategyconsultinglimited.co.uk). Having trained at The Academy of Business Strategy, and is an associate of the Institute of Management Consultancy and a member of the Institute of Directors, he is also a visiting lecturer on the MBA course at Cranfield University School of Management and a Judge in The National Business Awards

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What is Accounts Receivable Factoring?

Do you have clients that take up to 60 days to pay their accounts receivable? Waiting months to get paid for your invoices can wreak havoc in your company’s cash flow, especially if you have to meet payroll, pay suppliers and pay rent. But what happens if your business can’t wait to get paid because it must meet its obligations?

One solution to this problem has been gaining popularity recently. It’s called accounts receivable factoring and it allows you to turn your slow paying receivables into cash, almost immediately. It works by selling your receivables to a factoring company, who in turn, pays you on the spot. This provides you with the necessary cash flow to pay suppliers, rent and salaries.

Selling your receivables to a factoring company is relatively simple. It can be done with a 3-step process:

You deliver goods/services and issue an invoice
You sell the invoice to the factoring company who advances the first installment you up to 90% for them. The average advance is 80%.
Once your client pays the invoice, the factoring company rebates the remaining installment, less a small fee (installment #2)

As opposed to other financing products, accounts receivable factoring is easy to obtain and can be setup in a week or so. A critical benefit of a/r factoring is that the financing companies make their credit decision based on your clients. So, accounts receivable factoring is an ideal tool for small and medium sized businesses who cannot obtain bank financing but have a roster of solid customers.

About Commercial Capital LLC Commercial Capital LLC is a factoring company that specializes in accounts receivable factoring. For an accounts receivable factoring quote, please call Marco Terry at (866) 730 1922

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Non Recourse Factoring vs Recourse Factoring

There are very few things more important to a new, starting small or medium business than cash equity. There are many things that count as equity for example business equipment, cash on hand, line of credit, and even invoices. That's right! Invoices can be a means of equity for almost any business, but getting a working cash flow is usually only possible through recourse or non recourse factoring.

What exactly is non recourse factoring? How does non recourse financing differ from recourse financing? Is non recourse financing right for your blooming business? Let's take a few moments to explore the answers to these fascinating questions.

Factoring is a means of getting a cash advance on payable invoices. Factoring companies hold the payable invoices, and the business gets the much needed cash. When the debtor pays the invoice directly through the financing company, and monies remaining are then given to the business. There is a fee, of course, for this service, and the service has two types of factoring coverage: recourse and non recourse.

Recourse financing translates to what the meaning of recourse actually is in and of itself. When recourse financing is the term of the cash advance on payable invoices, should the debtor of that invoice not pay his or her invoice, the factoring company has "recourse", or the option, to get the monies owed directly from the business receiving the cash advance. Recourse financing means the business is held liable for the future payment of the payable invoice.

On the other hand, non recourse financing is similar but different. With non recourse factoring, should the debtor of the payable invoice not come through on the payment(s), the business is not responsible for the cash advance amount or fee. Instead, in non recourse financing, the financing company is held liable for receiving payment from the payable invoice.

Both types of factoring are popular, and usually, a financing company only does one. However, more and more financing companies are choosing to offer both services to their customers. Since recourse financing is less dangerous for the factoring company than the alternative, factoring companies are choosing both as a viable option for your cash advance needs.

As may be obvious, non recourse financing has a higher liability than the recourse financing to the factoring company. This means it is easier to get a recourse financing cash. Nonetheless, getting a factoring loan will have a lot of different factors taken into consideration such as credit rating, cash amount of the invoices available, and/or time business has been in business.

Finding a good financing company will be the best way to decide this answer. Factoring companies have different requirements and offers, and finding out whether financing is right for your growing or established business is only determined by speaking directly with a reputable factoring company.

Troy Degarnham is the author and webmaster of http://www.accounts-receivable-financing.info an informative website about Invoice Factoring.

Extensive help and tips on factoring companies, assets, small business, medical factoring, non recourse factoring and other factoring financial services

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