How Invoice Factoring Works
How Invoice Factoring Works for Businesses
Many businesses are facing challenges. Ongoing effects of pandemic lockdowns, inflation, and supply chain issues are all making it difficult to maintain steady cash flow. Invoice factoring is a type of financial service that can be helpful, even for businesses that may not qualify for traditional funding like a bank loan or commercial loan. Let’s look at how factoring works, its main benefits, and how a business can apply for it.
Get Paid Faster With Invoice Factoring
You don’t have to wait on slow paying customers with invoice factoring. Check out the easy steps to get paid for your invoices in as little as 24 hours.
- Apply for Factoring: The process is quite simple and fast compared to applying for a bank loan. Complete applications can be approved within days.
- Credit Limit:The factoring company investigates the customers you submit for factoring and establishes a credit limit.
- Deliver: Your business delivers products and services to your customers as usual. You upload the invoices to the factoring company’s portal instead of sending to your customers.
- Verification: After verifying that the product/service was delivered, the factoring company pays you the value of the invoice minus a transaction fee.
- Payment: Your customer pays the factoring company.
Why Wait?
Start getting paid immediately
How Does Invoice Factoring Work?
Any business that invoices its business customers then waits to be paid can apply for invoice factoring. It’s a type of financial service in which the factoring company purchases accounts receivable, allowing the client to receive immediate cash. Factoring helps businesses improve cash flow, providing working capital now, when it is needed to cover operating expenses and allows the company to take on more business. Invoice factoring shields them from the lag time involved in invoicing then waiting to be paid, plus rids businesses of the uncertainty from customers who may pay late.
In an ideal world, when businesses send out invoices, they are paid promptly. In the real B2B world, however, customers often require extended payment terms such as 30 – 60 days. When your customers are themselves having cash flow problems, it can delay payments. When invoices are factored, you are assured of receiving payment on a consistent schedule.