What is a Factoring Company and What is Your Best Choice

Invoice Factoring Company Summary

Invoice factoring companies provide working capital to businesses searching for financing. Moreover, a factoring company buys unpaid receivables and puts working capital into your business.

Invoice or accounts receivable factoring is a commercial financing method by selling outstanding invoices to an invoice factoring company. In addition, Bankers Factoring also takes the credit risk by offering bad debt protection.

And so small businesses, startups, and financially distressed companies can quit scrambling for funding by working with The Best Small Business Factoring Company.

In this factoring company article, we cover the following:

• What is an invoice factoring company?
• What is invoice factoring?
• How does invoice factoring work?
• Invoice Factoring Company Example
• How to qualify for receivable company factoring?
• How to choose a factoring company?
• Pros and Cons of A/R Factoring Company
• How much does a factoring company cost?
• What industries take receivable financing?
• Who is the best factoring company?

What is Invoice Factoring Finance?

Does Invoice Factoring meet My Cash Flow Needs?

A factoring company provides invoice factoring services by buying unpaid accounts receivable invoices from businesses with longer payment terms to speed up the cash flow. Invoice factoring or A/R factoring also enables businesses to access working capital after giving goods or services.

Factoring companies, also called factors, help your business stop waiting 30 to 90 days for customer payment. Bankers Factoring also takes the credit risk offering bad debt protection.

To explain further, read How Does a Factoring Company Work?

What is business factoring?

Invoice factoring is a method of business finance that is not a loan. Instead, you can sell your invoices to a factoring company in exchange for a cash advance. And with no balance sheet debt, AR invoice factoring provides cash flow solutions to struggling businesses. Plus, you do not need to wait up to 90 days for your customers to pay open invoices with invoice factor financing.

Invoice factoring is an alternative form of financing that does not impact your credit like traditional lending. Factoring and AR factor financing are also used to reference Invoice factoring as a whole. And Invoice factoring helps you unleash cash flow locked up in unpaid AR customer invoices.

For more information, keep reading What is Invoice Factoring? How Does it Work?

How does business factoring work?

Receivable factoring is a simple type of financing. In addition to this, unlike the common lending process, business factor companies provide a fast funding process.

The parties in an invoice factoring transaction are:

• The Invoice Seller (Your business)
• The Account Debtor (Your customer)
• The Factor (Bankers Factoring)

The four steps of business factoring or invoice financing:

1. The Invoice Seller provides a service or delivers a product and sends the invoice to the factoring company. So, complete our online application to begin your funding process.
2. The Factoring Company advances between 80-93% of the AR invoice value within 3 to 5 days to the Seller’s checking account on first funding. Then, funding is the same day afterward.
3. The Account Debtor makes payment to the factor within typical terms.
4. The remaining balance of the AR value is released to the Invoice Seller minus a small factoring fee. This is called the factoring rebate.

Keep reading How Invoice Factoring Works to turn your slow paying, outstanding invoices into same-day working capital via non-recourse business factoring.

Invoice Factoring Company Example

For example, you are a nurse staffing company with large monthly receivables for placing staff nurses in the field. And the demands of weekly payroll funding are lowering your cash savings. So, staffing factoring could help your business struggling with working capital demands. So contact Bankers Factoring to start financing today.

Example Invoice Factoring:

• Non-Recourse Factoring Line: $200,000
• Cash Advance 90%: $180,000
• Factoring Fee: 1.3% per 30-days or $2,600
• Daily Rate after 30 days: .065% or $130 per day.

In this example, Bankers Factoring is extending $200,000 in a monthly factoring line with 90% initial cash advances as it buys your open invoices. And the factoring is 1.3% per 30-days – in this event, we assumed payment was received in 30 days. Given these terms, the staffing company’s final rebate is $14,400.

Please read what are factoring company reserves.

How to qualify for accounts receivable company factoring?

To qualify for invoice factor financing, your company needs to meet these eight criteria:

1. A completed factoring application
2. An accounts receivable aging report
3. Invoices to factor with confirming delivery of service or product information
4. Credit-worthy clients (we will check on their credit for you)
5. A business bank account
6. A tax ID number
7. A form of personal identification

Keep reading the full article 8 Requirements to Qualify for Invoice Factoring Services.

How to choose an Invoice factoring company?

Now, you are ready to research and work with a factoring company. In that case, here are six main concerns or questions to ask before signing an invoice factoring company agreement.

1. Does the factoring company have expertise in your industry?
2. How much is the initial cash advance or advance rate?
3. Are the factoring fees and rates competitive for your business and industry?
4. Does the factor provide “recourse” or “non-recourse” factoring services? Understanding Non-Recourse Invoice Factoring.
5. How much funding power does the factor have? Are they able to support your monthly receivables volume plus your growth?
6. Does the factor have minimums per month? Hidden Fees?

To explain further, keep reading Why Sell Your Accounts Receivable?

Pros and Cons of an A/R Factoring Company

If your business struggles with cash flow management, payroll funding, or financing for growth and expansion, it is important to know both sides of invoice factoring. So why do companies use A/R factoring?

Advantages of Invoice Factoring:

• Fast funding process: 3 to 5 days, then same day after setup
• Qualification is based on the account debtor’s credit worthiness (ability to pay their invoices)
• Bankers Factoring takes on the credit risk and provides bad debt protection
• Startup-friendly and great A/R customer service. Non-Recourse Factoring for Startups.

Disadvantages of Invoice Factoring:

• Conventional lending products, like business loans, can be cheaper but requires strong credit and financial strength
• Not always a long-term solution for fast growing companies
• Factoring companies contact your customers, but only to verify. How Factor Financing Impacts Customer Relations.

To know more, keep reading: The Pros and Cons of Factoring A/R.

How much does factoring cost?

Factoring rates usually start around 1% per 30 days and go up to 2.9%. Moreover, factor fees are based on the nature of your business, including:

• The risk associated with the account debtor – your customer’s credit scores
• The risk associated with your industry and external factors
• The size and volume of the A/R factoring line
• The risk related to the Seller’s internal controls and operational performance

Keep reading Factoring Rates and Fees Explained.

What Industries Use Receivable Financing?

All industries have the option to utilize receivable financing. Thus, invoice factor financing is typical for Invoice Sellers who need payroll funding, cash for operating costs, and sales or marketing plans. Common Seller’s industries include:

• Staffing Agency
• Oil and Gas
• Cable and Telecom
• Government Contractors
• Janitorial Company

Keep reading What Industries Use Invoice Factoring.

Who is the best factoring company?

Award-winning and employee-owned Bankers Factoring, The Best Factoring Company, helps Invoice Sellers turn unpaid invoices into fast working capital. In fact, our non recourse factoring program protects Sellers from account debtor insolvency, bankruptcy, and protracted slow pay. In addition, our company provides professional financial solutions for companies struggling to make ends meet.

And we offer a fast-funding process of 3 to 5 days, with same day invoice financing funding upon approval, unlike many factoring companies, we help you faster and safer with your cash flow issues. Take action today to get the critical money you need tomorrow.

Ready for the owner-employees of Bankers Factoring to help you grow your business through invoice funding with bad debt protection? Use our fast online factoring application or call the toll-free number 866-598-4295

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