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Invoice Factoring

What is Invoice Factoring?

Essentially invoice factoring, of any form, is when a finance company purchases an invoice, freight bill, or other type of account receivable for immediate cash.

Unlike banks, finance companies, or factors, make their decision to purchase an account receivable or invoice based upon the credit worthiness of your customer – not you.

Factoring will put cash in your hands now – not in 60, 90, 120 days or whenever your customer decides to pay you.

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Finding A Low Cost Invoice Factoring Solution For Your Business

August 17, 2011 By

Factoring may be one of the least well known and yet most used financing tools for business around. How does it work? Simply, you are given a loan backed by unpaid invoices. This allows you, as a small business, to cover payroll and other expenses while you wait for outstanding invoices to be paid. The overall process includes applying for the factoring and then you must keep track of all unpaid invoices that are from companies with established credit.

So with that in mind, then, finding a low cost invoice factoring solution for your business becomes incredibly important. Factoring allows you to take invoices and turn them into cash, but how much you are charged certainly plays a role in whether or not you will take advantage of factoring as a service. Here, then, are a few tips on finding a low cost invoice factoring solution for your business.

The best place to start your attempt at finding a low cost invoice factoring solution for your business is to look online. When you search for factoring solutions, you will find that there are a number of institutions available on line who offers the service. By starting on line with your search, you will find that you can look over a number of institutions and compare prices quickly and without leaving the house. Most offer quotes through online forms so that you can get an idea of where the market is as far as cost of factoring.

Secondly, when you are finding a low cost invoice factoring solution for your business, you should check with local institutions. If you are a small business, you may want to look with banks and financial institutions who work with small businesses often. At times, it can be to your advantage to talk with someone face to face. Also, since you will have already done research online, you will already know what a good deal looks like. This can be of great help to you when you are quoted rates and fees for factoring with your invoices.

Finally, finding a low cost invoice factoring solution for your business is about sitting down with all the information you have collected and making a decision. Consider the reliability of the institutions you look at, their rates, and how much experience they have with small businesses. Once you have made your decision, contact the institutions immediately and set up your factoring account.

Finding a low cost invoice factoring solution for your business is not difficult, but it does require a little bit of work. Like with anything, simply doing some research will give you a good idea of what to expect and where to look for it. If you take the time to shop the internet, check local companies and make a decision based on your information you are less likely to end up in a relationship that does not work. Remember, you are dealing with your own money here as well as services that affect your employees. Take a little extra time, do a little homework, and make the right decision the first time around.

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Can Invoice Factoring Help Your Business As Much As A Bank Loan?

August 6, 2011 By

We often hear about how hard it is for small business to get loans approved these days.  Banks simply are not providing loans to many of the companies that keep the USA economy moving forward.  If a small business is conducting business with other business’s then invoice factoring can provide many of the benefits that a business loan can provide.  Often banks provide lines of credit that allow the business to borrow up to 80% of the accounts receivable in good standing allowing the business owner to have access to funds for payroll, supplies, and other operating expenses before the customer payments arrive.  This is very similar to how accounts receivable factoring works, except it’s much easier to get approved for a factoring facility in today’s credit crisis.

If your bank has declined your working capital loan the next step should be to give invoice factoring or a business cash advance a serious look.  Of course you need to offer terms to your customers to have accounts receivable so if you do not offer terms, then this finance tool will not provide a solution.  If you do offer sales terms and the customers have reasonable credit you should have very good chance to get approved for a factoring facility that will offer an advance of up to 90% of the invoiced total the day you generate the invoice.  Factoring companies are able to base the credit decision on your customers, not your balance sheet so your able to leverage your customers credit to obtain working capital.  It makes sense if you think about it since your providing credit to your customers in the first place.

You can then take a look at your business model and think about how your business could change if all your customers paid in one day.  The benefits, if any, will very greatly depending on how your company operates.  What value is getting 90% of the invoice the day you generate the invoice?  Can you take advantage of supplier discounts?  Can you add additional staff?  Can you grow the business easier by having your cash quicker?  Then you need to look at the cost of factoring.  Most factors charge 1% to 4% of the invoiced total which is very similar to a credit card fee.  Can you come out ahead after paying the factoring fee?

As you can see invoice factoring is a much easier way for a business to obtain working capital when compared to a traditional bank loan.  If the bank turns away your request for funding, then invoice factoring may offer similar benefits with a fast approval.  Most factoring deals can be approved in as little as 2 days.  Your cost of funds will be higher, but if you can offset the cost with benefits it can be a very powerful business funding tool.

Jeff Bross, President, Capital Quotes, LLC

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Invoice Factoring: Your Cash Flow Solution

August 3, 2011 By

Invoice factoring is a growing trend according to renowned industry experts.  In the current prevailing market scenario, the need for cash or working capital funds is paramount. The problem arises when a slow payment processing cycle (PPC) leads to diversion of funds. Once a company delivers goods or services, it is important that the bills are paid. But, it seldom happens due to the economic mechanisms we all work with. This is where small business factoring can help. Ideally, the concept works on a single invoice contract basis. Although, if your company shares a good credit reputation with an invoice factoring company, then they might be willing to work on an annual contract basis. Now, we all must understand that invoice factoring is available to all sectors of the economy throughout Ontario. Industries such as FMCG, pharmaceuticals, transportation (trucking factoring), power, telecom, etc. have all benefited immensely through invoice factoring.

Ultimate Cash Flow Solution:

Invoice factoring is ideally regarded as the best solution to a loan or any other debt based cash flow system. It doesn’t require any type of debt. It is an option that allows businesses to get money extremely fast and is not dependent upon the credit history of the company or how long they have been in business. It can be incredibly difficult, in fact, nearly impossible for a business to qualify for a bank loan if they have poor credit and are not already established. Today, it is much harder then in the past to qualify for a loan, even for those businesses that do have good credit and have been operating for some time. It is simply indicative of the times. Companies that choose to participate in accounts receivable factoring won’t have to worry about either. What is important to a Factor is the credit history of a business’ clients. Their clients must have very good credit because this increases the likelihood that they will be repaid.

Maximize Profits:

Availability of so called “ready to use” funds can work wonders for any business. It can help your company to apply for tenders and orders which under normal circumstances they would not have, simply due to lack of funds.

I hope this information helps you understand the importance of invoice factoring when it comes to cash flow to the business.

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Invoice Factoring Offers Alternative to Bank Loans

July 23, 2011 By

A sale is not a sale until you collect the money. The time between issuing an invoice and collecting on it can be a sparse financial time for any company. During this time, the business has fit the bill for the supplies, time, and resources used to supply a client with the product or service. Now, that business must find a way to cover operating expenses until the invoice has been paid in full. This, unfortunately, can take anywhere from thirty to ninety days before a business sees any in-cash flow. There are two options in this scenario. Either take out a painful, stipulation laden bank loan, or find an invoice factoring company.

Invoice factoring is a process whereby a business sells its current, unpaid accounts receivable to the factoring provider. This gives the business cash, up front, to take care of operating expenses like covering payroll, buying supplies, and paying benefits and workers compensation. Invoice factoring allows businesses to attain the funds they need based on the amount of money they anticipate on receiving from clients.

Businesses of all sizes can utilize invoice factoring, but they can be most useful for small to mid-sized businesses or businesses that are relatively new. Most businesses in financial crisis look to bank loans for the funds they need. But businesses that are too new to have a financial-track record, weak balance sheet, history of financial problems, that are in turnaround mode, or undergoing big changes, are often unable to find a willing lender at any price.

Restrictive lending requirements for cash flow, equity, profitability, and years in business can also hinder a mid-sized to small business from getting the loan they need. Even if a business has a solid history, if times are tough, banks and finance companies limit lending. Invoice factoring offers options beyond the restrictive offers of loans. It is an effective cash management tool that can save businesses from going under.

Invoice factoring is the smart option, sometimes the only option, for companies to stay in business. Invoice factoring is a way for businesses, with credit problems or other cash flow issues, to get the money they need to pay their expenses and keep their business growing.

From day-to-day operating expenses and taking advantages of trade deals to purchasing equipment, invoice factoring funds can be used for any business need. It is an effective cash management tool that can help a business stay up and running without having to worry about collecting on invoices. Every business that offers services before true payment is at risk of running into financial problems. If your business needs help making it through a financial dry spell, you need a dedicated invoice factoring provider to get you the cash you need.

 

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How does Invoice Factoring differ from a Bank Loan?

July 16, 2011 By

For many companies facing difficulties in the current economic climate, a bank loan can seem like the only option available to inject much needed capital into a business, particularly if you run a Small or Medium Sized Enterprise (SME). Unfortunately, this can come with numerous drawbacks. Many banks now operate tighter lending restrictions and high interest rates. A sizable bank loan on your balance sheets could also make your business less attractive to potential investors.

How Does Factoring Work?

Invoice Factoring works by allowing companies to sell their invoices for instant cash. The factoring company will provide you with instant capital, in some cases up to as much as 90% of the value of your outstanding invoices. They will then chase up the client payments on your behalf, leaving you with the funds you need, when you need them, and time to focus on other important areas of running and developing your business.

What are the benefits of Invoice Factoring compared to a bank loan?

- No negative effect on your credit rating.

- Instant capital when you need it

- Simplifies your finances, freeing up your time and allowing you to focus on other aspects of developing your business

- Your Invoice Factoring Company should be able to release more funds to you to reflect the growth of your business without the necessity of renegotiating a new contract.

In many circumstances invoice factoring could actually be a far more effective solution to cash-flow problems for SMEs. Although factoring provides an instant cash injection for your company, it doesn’t work in the same way as a loan and wont appear as a liability on your balance sheet. Instead, factoring takes into account the natural ebb and flow of your capital due to the often lengthy process of invoicing clients, allowing you to simplify your finances and manage your daily expenses without slipping into the red.

Make sure you seek out a reputable, fully accredited invoice factoring company who will be able to offer you the best deal to reflect your business model. By ensuring that you always have access to the capital you need, you should be well placed to see your business thrive in the future.

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Invoice Factoring Helps Small Businesses Succeed

June 19, 2011 By

Is your company lacking capital? Or does your business experience seasonal fluctuations for its products and services? Are you worried about the effects a recession can have on your business, or the financial stability of your clients? Today’s troubled economic environment means that businesses are under constant pressure to maintain profitability. Invoice factoring may help.

If you are spending too much time and money on your accounts receivables and collections, invoice factoring can help.

What is invoice factoring? It is the age old practice of using your invoices or receivables as collateral so that a factoring company can give you an infusion of cash. Historically factoring has been around for more than 3,000 years. Recent trends include single invoice factoring which can also be called spot factoring. This is when you factor one invoice at a time.

Factoring is simply a way to acquire business capital without having to make any type of payments to a lender. It’s much better than a typical business loan because you don’t have to worry about monthly payments accumulating every month. Many companies simply don’t want to worry about getting paid by their clients 90 days after invoices are sent out – because it often creates a financial burden on their business to have to wait that long.

Plus these days, some businesses may suffer from a less-than-perfect credit score. Factoring firms are experts at helping you minimize your risk from bad debt while at the same time they help you improve your cash flow dramatically. Some factoring companies can even provide cash flow within two hours wired directly to your bank account. Other companies can take up to 48 hours.

a factoring company collects your receivables for you, providing business capital. This also minimizes your bad debt by making sure your clients pay on time. It can give you peace of mind in having a positive cash flow. Uncertainty regarding cash flow is removed, and your company can be more positive about the future since new orders are more easily filled, employees, utilities and vendors are paid on time and debt payments to credit card companies go out on time.

The professional fees among various factoring companies are competitive. Every client’s circumstances are unique which may have an impact on the fees charged. Not all invoice factoring companies expect to buy 100 percent of your receivables and they often advance up to 90 percent of invoices you are selling.

Ultimately, invoice factoring can take away the worry regarding your clients making their payments, and you can focus on new busniess tather than chasing down slow or no pay clients. Look for invoice factoring companies online today, and start factoring.

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Invoice Factoring Rates

June 18, 2011 By

If you own a business that sells to other businesses, then you already know how important it is to keep the cash flowing.  Invoice factoring is the process of selling your accounts receivable for immediate cash allowing the business to have funds within one day of generating the invoice, rather than waiting 30 to 75 days to get paid.  Invoice factoring rates tend to be all over the place, depending on which factor you select to do business with.  The factoring rate is the discount fee the factoring company charges to advance these funds to you.  The factor then waits for payment from your customer.  Most factors charge anywhere from 1% to 5% of the invoice total to provide these invoice advances.

Factoring rates can be structured in a variety of ways but what’s most typical is in a daily, 10 day, 15 day, or 30 day segment as a percentage of the invoice.  Let’s say you have a staffing firm that is going to factor 10,000 per month and your factoring rate is 1% each 15 days.  This means your cost of factoring on a 45 day customer would be 3% of the total invoice.  If your customer paid within 30 days your rate would be 2%.  If you compared this to offering a 2% quick pay discount to your customers the discount rate charged by the factor is in line with what your business is willing to give up for speedier payments and better cash flow.

After you decide if the factoring concept makes sense for your business, then start looking at factoring companies and get some quotes based on your overall deal for the factoring company.  Most factors will want to review your customer list and accounts receivable aging report before providing a quote to determine the credit risk on the deal and how long they will be waiting for payment.  Don’t be surprised if the factoring rates vary by up to 90% as each factoring companies expenses are not the same and some factors pay much for the funds they use than other factoring companies.  Additionally, you will have some factoring companies that provide more services that can drive up rates, but you may or may not want the additional services.  If you really just need the cash flow, then the best factoring rate often makes the most sense as long as you read the contract carefully and do not find any hidden charges.

Invoice factoring is helping a lot of small business owners as banks have not been very helpful to this area of the business lending market.  It’s very important to make sure you do not over pay for factoring services as it does not need to be expensive.  If you understand the factoring pricing and read the contract carefully, you should be able to secure a great working capital solution with a reasonable cost of funds.

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Construction Invoice Factoring Boosts Cash Flow for Builders in Tough Economy.

May 2, 2011 By

The auto industry is getting all the attention during this recession but the construction industry is quietly feeling the pain also. You hear a lot about “housing starts,” “sales of new homes” and “sales of existing homes” when analysts are discussing economic indicators but rarely do you hear a company mentioned by name. That’s because there are so many more players in the industry and no single entity receives as much attention or has as much impact as a company like General Motors does for auto industry. But that doesn’t mean that there are not just as many challenges for builders and contractors both large and small.

One of the major challenges facing the construction industry is financing. Credit is tight and there are many builders eager to move forward with projects that can’t get the capital do get a project started or an existing project completed. That is where construction invoice factoring is a necessary and logical alternative.

During the course of any construction project a builder, contractor or sub-contractor is likely holding a substantial amount in receivables. They have performed a task or even finished a project and are waiting to get paid. These days, every company is waiting as long as possible to pay their bills so the builder is waiting up to 90 days or longer to receive payment. Meanwhile, the builder has expenses that must be paid such as salaries, maintenance, rent, etc. Getting financing from a bank to keep the business solvent is difficult, to say the least.

However, the fact is that the outstanding invoices that a builder is holding are an asset and have a value. Construction invoice factoring allows the builder to leverage this asset to free up much needed cash to pay expenses. After all, it’s all about cash flow and if cash isn’t flowing in then there is no cash to flow out.

Invoice factoring is the practice of “selling” invoices to a company or individual called a factor. The factoring agent provides the builder with a percentage of the face value of the invoices, typically 70-90% depending on the payment history and credit worthiness of the invoiced companies. When the bills are finally paid the factor provides the balance of the amount due less a small percentage for the service. This “fee” or “rate” ranges from 1-5%.

The key benefit of construction invoice factoring is that the builder or contractor ends up with cash in hand quickly, often in 24-48 hours. And the cash they are receiving is their money, not funds that must be repaid to a bank over time. This allows a builder to stay current with their payables and invest in items, like equipment, that will make their business more efficient and more profitable.

Construction invoice factoring has, in the past, been viewed as an expensive proposition and the action of last resort. But more builders, along with members of many other industries, are reconsidering the value of receivables factoring. In a tight credit market, invoice factoring is keeping many companies in business. Even some banks have started to appreciate the benefits of receivables factoring and are starting divisions to offer this service.

Sometimes it takes adversity to highlight a formerly under appreciated service. And in a recession where much of the focus is on activity in the construction sector, construction invoice factoring has become a financial lifeline for many builders and contractors, both small and large.

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Spot Factoring Helps Businesses Get Cash Now

April 18, 2011 By

An old and widely used form of funding for businesses known as standard invoice factoring, has been around for over 4000 years. Now there are a number of innovative new factoring solutions called single invoice factoring, or spot factoring, where companies can get short-term working capital to grow their businesses and improve cash flow. Small businesses often find it difficult to get traditional funding.

Here’s how spot factoring works. The factoring company purchases selected invoices at a discount. It is a fast, easy, and affordable way to turn receivables into cash.

Many businesses do not get paid immediately for delivered products or services; but, in order to sustain and grow the business, they need cash. Spot factoring benefits businesses that do not get paid for 30, 60 or 90 days by advancing up to 90 percent against the company’s invoices.

Spot factoring companies typically look at the creditworthiness of the client’s customers. Invoice factoring companies often fund within as little as 24 hours, and they don’t expect to buy 100 percent of a company’s receivables, so there are no minimum or maximum sales volume requirements.

Most invoice factoring companies have professional rates that are competitive. Each client’s circumstances vary which may have an impact on the fees that the invoice factoring company charges.

This “use it as you need it” funding option can be very effective during tough economic times. Each invoice purchase is a separate transaction and does not form part of a portfolio lending approach. The transaction is modeled as a buy-sell transaction.

First the spot factoring company will undertake a due diligence that often takes one to two business days. Once this step has been completed the client is at liberty to offer invoices for purchase. Once the invoices are received, the invoices, the spot factoring company will check the credit of each debtor who is named on the invoices provided. They make sure that the sale represented has been satisfactorily completed. Once this is done the debtor is advised of the purchase of the invoice by the spot factoring company, and the client receives their funding. Once the credit period is over, the debtor pays the spot factoring company directly, thus completing the transaction.

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Compound Profit Now Offers Invoice Factoring Financing in Only 24 Hours

April 5, 2011 By

Compound Profit helps the American entrepreneurs get the needed working capital, even if they have been turned down by the banks, through its funding solutions that include invoice factoring, purchase order factoring, credit lines, business credit cards, real estate finance, equipment finance, unsecured and secured business loans with starting interest rates that are often amazingly low.

 

Brian Jones was struggling to meet the payroll because he was lacking the needed working capital, when he has discovered Compound Profit’s website through a Google search. According to him, “I run a successful small business, so I have applied for a loan at several banks prior to meeting you. To my surprise, I was turned down over and over because my company didn’t have a long term business credit history. Fortunately, Compound Profit has bought my invoices right away and the cash was in my account the very next day! I’ll definitely use your services whenever I have cash flow problems.”

 

According to Mr. James Penny, founder, president and CEO of Compound Profit, “Too many people are turned down by the traditional lending institutions because they don’t have stellar business credit scores. With invoice factoring, their business credit isn’t important at all: we buy the invoices from the company owners and thus we take over their risk, waiting for 30 days or more until their clients pay them. The business owners have access to the needed funds in only 24 hours and, since our invoice factoring rates start at only 0.75%, they are actually saving money by using our invoice factoring program”.

 

Compound Profit provides working capital through invoice factoring for companies of any size, no matter if they have good or bad business credit records, and offers complimentary business analysis and fundability reports to all the American entrepreneurs. Launched in Texas, Compound Profit has expanded throughout the entire U.S.A. and operates under a successful franchise model.

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