Invoice Factoring

Invoice factoring is a growing form of business financing. Having been around for over a hundred years, invoice factoring was once looked at as a last resort, today it is a great way for businesses to create working capital. Many traditional lending institutions have stiff financing processes that can take a long time to receive approval but when using an invoice factoring company you can have fast approval and cash in hand within days not weeks. This is also a great option for businesses with less than perfect credit histories, this can make financing through a traditional lender nearly impossible. With invoice factoring the businesses credit history is not a deciding factor with approval, the customer invoices are. Invoice factoring companies will offer businesses 70% to 96% of their invoice totals in cash advances. Invoice factoring is a fast, easy and cost effective way for business owners to get the money they need.

Common uses for Invoice factoring

• Meet payroll obligations
• Free up money to start new project
• Renovations
• Remodels
• Invoice purchases
• Equipment Purchases
• Tax payments

What is invoice factoring?

Invoice factoring is the sales of customer invoices by a business to a factoring company in exchange for cash. Businesses can receive 70-96% of their customer invoice totals, creating working capital for the business. There are two main forms of invoice factoring available; non-recourse and recourse factoring. Each as its own benefits to the business owner.

Non-recourse factoring is where the factoring company holds all risk in the invoice factoring process. The factoring company is responsible for collecting the customers debt on the invoice. If the customer fails to pay the factoring company can not go to the business owner who sold the invoice for repayment of the money. The factoring company must pursue all legal actions to receive the money from the customer, not affecting the business in any way. In layman’s terms the business owner is not responsible for any unpaid debt.

Recourse factoring the business owner is responsible for collecting the customers invoice debt. If the customer does not repay the debt the business is responsible for repaying the factoring company for the cash advanced on the invoice. The business owner is also responsible for any legal actions needed for customers repayment.

Common benefits to Invoice Factoring

• Not a loan
• Credit History does not matter
• Does not affect businesses credit rating leaving lines of credit open for use
• Fast approval
• Cash in hand within days
• 70 to 96% of invoice total
• Low fees