Top Rated Invoice Factoring Company
Accounts receivable or invoice factoring is an asset-based financing arrangement in which companies use their receivables as collateral in exchange for cash. It’s a means for clients to accelerate cash flow by selling their open invoices. Our clients receive cash in advance of payments from their customers, typically within 30, 60 or 90 days, providing needed capital to meet operational overhead. Unlike other types of financing, A/R financing focuses on your sales, not your balance sheet. As sales increase, more working capital becomes available to meet the demands of operating your business. A/R Financing provides a continuous, long-term source of funds on a short-term basis.
Small Business Invoice Factoring For Cash Flow Needs
Cash is undoubtedly the most important thing your business needs in order to keep the business cycle going (and growing). When businesses offer goods and services on credit terms (i.e. Net 60 days) in order to entice new customers to make purchases, they can find themselves in a cash flow pinch. Several larger corporations will only pay with net terms making this a big challenge for a new up and coming business that needs more capital to keep up. Invoice factoring helps a growing small business’ cash flow needs by providing the necessary up front capital to be able to fulfill orders without adding more debt to the balance sheet.
How Invoice Factoring Works
After a company delivers the product or service to their customer, they issue an invoice. The company then “sells” the invoice to the factor (us), and in return receives an advance, typically between 70-90% of the value of the invoice. With the capital on hand, the company can take on more work, pay employees or buy more materials, supplies and inventory. Once the debtor pays the outstanding invoice, the business receives a discount or “rebate” for the remainder of the funds, minus a fee that is based on the term and value of the invoice. In the end, both parties benefit as the customer gets cash upfront and their customer gets favorable payment terms.
How Does Traditional Factoring Compare With Invoice Factoring?
Factoring is a transaction in which a third party will purchase a business’ invoices at a discount rate. As a result, the factoring company, now owns the accounts receivables. Invoice financing, also known as accounts receivable financing, is a loan in which a business pays a predetermined percent on their invoice to a lender as a fee for the loan. In this case, the invoices serve as collateral as the business pays off lending fees when invoices are paid. While these are actually different solutions, it is common for both to require monthly minimums. We are known as one of the best factoring companies due to our low monthly minimums and ability to help our client companies grow.
Benefits Of Factoring Companies
Factoring Companies like Strategic Capital offer invoice and accounts receivable factoring services that can provide you with up to 90% of your invoice value in less than 24 hours. The main factoring benefits include:
You get paid immediately – as soon as you invoice your work – not in 30, 60 or 90 days.
You can work with a lender whose business it is to know your business well, helping you grow.
You will get more capital from a great factoring company like us than you ever would from a bank.
Someone else does the collecting for you, saving you the time and resources chasing down client payments.
A professional team evaluates the credit risk of your customers, keeping you from extending net terms on dead weight clients.
Variables That Affect Invoice Factoring Rates
Rates can vary from less than one percent to over five percent of the face value of the receivable between lenders. When a factoring company reviews an application to determine the factoring rate, it considers many variables, such as: the credit strength of its clients, a company’s sales volume, payment cycle trends in that industry, invoice amounts and the overall climate of the subject’s industry. Another item that can affect the rate is the existence or the opportunity for accounts receivable insurance.
Deciding On A Factoring Company
Think about how important each of these criteria are for your business and look for a long-term partner that will provide you and your business with the optimal combination of features, flexibility and terms that you deserve. We offer an arrangement that offers you the funds, flexibility, transparency and terms that work for you. As a guiding principle, look for a partner you’ll want to work with long-term with people that you like and don’t settle for anything less. Ready to work with an invoice factoring company you can trust now? Check us out!