A Primer On Accounts Receivable Factoring

Knowing what is available to a small to large sized business in need of solutions to short-term gaps between financial obligations such as payroll and actually being paid by your customers can make planning a lot easier.

An Effective and Common Option

Many industries rely heavily on accounts receivable factoring to get them through these gaps. Different types of business from staffing companies to IT tech companies, textiles companies to security guard services and even in equipment manufacturing companies all rely on factoring to address cash flow issues.

The benefits of factoring for any company are easy to list. They include:

  • Up to 80% of the value of the accounts receivables provided into your business account in days.
  • Approval of factoring services in 24 hours.
  • The ability to use the cash you have already earned without having to worry about getting a loan, making long-term or short-term business loan payments. Your business credit score is not considered in the approval process, so a poor credit rating is not an issue.

You also have the ability to choose the company you want to be your factor and to compare rates and fees to get the best option. With the top factors, there are no additional or hidden fees, and you can factor the accounts receivables you choose for as long as you use their service.

The Simple Process of Factoring

We often hear people talk about factoring as if it was a complicated process. In reality, it is very simple and can be easily broken down into six easy steps.

1. Your business sells a product, provides a service or goods, to another business or government agency.

2. You apply for accounts receivable factoring using a simple online application and send the invoices you wish to sell to the factor.

3. The factor reviews the creditworthiness of your clients, verifies the invoices, and deposits up to 80% of the value of the invoices into your designated bank account within days.

4. You have immediate access to the funds to use as you need.

5. The factor manages the accounts and collects from your customers.

6. Upon full payment of the invoice, the factor deducts the fees for their service and provides you with the balance or the reserve funds held back.

You can choose to factor as much or as little as you need with business-friendly companies offering accounts receivable factoring. This allows the business to take on new work, hire new staff, and even replace equipment without having to wait weeks or months for customers to pay.

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