Got Invoice Factoring Questions? We’ve Got Answers!
Thinking of partnering with an invoice factoring company? If you’ve never pursued this type of alternative business funding before, you’ve come to the right place. We’ve put together a list of invoice factoring FAQ’s to help you determine if our invoice factoring services are the solution for your business.
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Invoice Factoring Frequently Asked Questions
What is invoice factoring?
Factoring invoices (also called account receivable factoring) is the act of selling your open accounts receivable to an invoice factoring company for a percentage of the value. The factoring company advances up to 98% of the invoices’ value and bills your customers. Once it is paid in full, the remainder of the discount is returned to your business, minus a factoring fee. Business invoice factoring is an alternative financing option that helps business owners in all stages – from those just starting up to well-established companies. It improves your business’ cash flow so you no longer have to wait months for the money from your customers
How will factoring invoices help my business?
While invoice factoring has plenty of benefits, many businesses partner with factoring companies because they can receive fast financing with zero debt added to their balance sheet. Invoice factoring helps companies avoid needless overhead costs while they build and improve their own credit. Steady cash flow from factoring enables companies to weather seasonal highs and lows, slow-paying customers and unexpected growth.
Will factoring invoices look bad to my customers?
The short answer is no. Accounts receivable factoring has been around for centuries and is a perfectly viable and acceptable method of helping increase your business’s cash flow. In fact, working with a factoring company means the factor thought your business was solid and not a lending risk. Also, working with a factoring company can actually be better for the customers as they now have a bit more time to pay their invoices, while you as the business owner won’t have to wait for that inflow of cash for services rendered or goods delivered. Another thing to remember is that invoice factoring is not money that you borrow and have to pay back, like a bank loan. It is money that you have already earned by delivering a product or service, you are just receiving it at a faster rate to better serve your customers.
What if my customer doesn’t pay their bill?
There are two types of factoring services: recourse factoring and non-recourse factoring. Higher fees accompany non-recourse factoring, but with this type of factoring, the factor will assume the risk if the customer doesn’t pay. Recourse factoring is less expensive, but businesses are required to buy the invoice back if it goes uncollected for a fixed number of days outlined in your factoring agreement.
Do I have to sell all of our invoices to the factoring company?
Accounts receivable factoring gives you the control. You can factor as many or little invoices that you want. You can also choose which specific clients to factor. It’s entirely up to you. You may also use the factored money that you receive for any business expense you choose.
How often can I factor invoices?
If you have unpaid invoices and want to factor them, a factor can fund you on your timeline. There may be months you need to factor lots of invoices and months where you don’t need to factor at all. That’s ok. Factoring is a type of business funding that grows with your company. You can start the process by getting a free quote!
If my credit history isn’t great, will that affect my ability to factor?
Because your customers are responsible for paying the outstanding bills, we look at your customers’ credit-worthiness when deciding if your company is a worthwhile risk. Your personal or business credit history really has no effect on whether or not your business qualifies for invoice factoring.
How long does the invoice factoring process take?
For first time applicants, approval usually takes 3-5 days, with a cash turnaround of 24 hours or less. While your business receives most of the cash value for your invoices upfront, the time it takes to receive the remainder relies on how long it takes your customers to pay their bill to the factor. After your customers pay, the rest of the discount is returned to you, minus a factoring fee.
What types of industries can use invoice factoring?
We work with several different industries. Almost every business-to-business company can be factored. To name a few: trucking companies, healthcare companies, construction companies, oil and gas companies, manufacturing companies, staffing companies, clothing and textile companies. Don’t see yours listed? Don’t worry–we’ll find someone to do it. Call us anyways!
What will Factor Finders do for me?
Factor Finders will partner you with the best invoice factoring company in your industry to get you funded. Don’t waste your time with tedious searching for a factoring company when you have a steady business to run. We have a nation-wide network of funding professionals readily available for you. There are no additional fees needed to be paid to us. We will cater to your business and make sure that you get all the assistance needed to quickly access the capital you need to grow your business.