Of course a factoring company expects to earn a profit on the cash advance and charges a fee for their service. When a business is strapped for cash they often turn to factoring accounts receivable as a financing solution. The obvious value of invoice factoring is the ability for an early stage company to acquire working capital from what may be their only real current asset, the credit rating of their customers.įor a free consultation, contact Trust Funding Solutions at 80įiled Under: Factoring Invoices Tips For A Smooth Factoring Application Construction (Contractors, Suppliers, Subcontractors, etc.). Industries in which invoice factoring is an accepted practice include: The factor needs to have an expertise in and serious understanding of the business in which they factor invoices. Many smaller suppliers, distributors and wholesalers with strong balance sheets and good payment histories have invoices which are strong candidates for invoice factoring.īecause the underwriting process for invoice factoring is industry specific, it is critical for companies seeking to leverage their invoices to select the appropriate funding factor. The invoices billed to “major logos” (Walmart, Target, GE, Apple, Microsoft), and government entities (local, state, federal agencies and departments) are usually highly factorable. The major underwriting criterion is the credit rating and solvency of the invoiced firm. The borrowing company must be at least a year in business, with no tax liens outstanding or recent bankruptcies. The criteria for underwriting invoice factoring is very simple. No more waiting 30, 60 or even 90 days to get paid with invoice factoring.įactoring fees are determined through the initial underwriting process, and average between 1.5 and 2.5% each month on balances outstanding. The remaining portion will be remitted to you once the invoice is paid minus the factoring fee. You will normally receive from 80 to 95% of the invoice value depending on the industry of the customer. The factoring company purchases your invoices at a small discount turning them into immediate cash. Invoice Factoring is a financial tool that leverages the accounts receivable of a company to generate and accelerate cash flow.
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