What is Factoring?

What is Factoring?

Factoring is a financing process that gets you money for your receivables immediately, instead of you waiting 30–60 days for your customers to pay. The process has a variety of names: “Invoice factoring,” “AR Factoring,” “Asset-Based Lending,” and “Commercial Finance Lending.” Regardless of the name, the goal is to obtain money for your receivables as soon as your sale or service is complete. It solves a cash flow problem by enabling you to meet payroll obligations or pay other business expenses in a timely manner. To summarize the way factoring works:

• We advance 65–85% of your invoice on the day the service or sale is complete and you invoice your customer.
• We will mail your invoice to the customer on your behalf and collect the accounts.
• The balance (15–35%) minus our fee (2.6–5.5%) is paid to you the day we receive payment from your customer.

If your business is a business-to-business company and you generate invoices for services provided or goods sold, you are an ideal candidate for factoring. Here is a partial list of industries that we serve:

• Temporary & Permanent Staffing
• Distribution
• Freight and Trucking
• Manufacturing
• SES Providers
• Security Guard Services
• Newsletter Publishing
• Telecommunications
• Environmental Consulting
• Janitorial Services
• Catering Services
• Consulting
• Commercial Delivery
• Wholesale

Most companies factor because they have expanded so rapidly that they outgrow their working capital, line of credit, or did not have adequate start-up capital. Companies could also use factoring if they experience:

• Large customer concentration
• Slow turnover in receivables
• Loss of bank line of credit or are otherwise not bankable
• Seasonal business cycles