Invoice Factoring
Capital Without the wait
When you can’t wait until clients pay their invoices, the speed, flexibility and ease with which you can acquire financing through invoice factoring can make it an attractive option for many businesses.
Though it is a common form of business financing, invoice factoring is not considered a loan. It is a financial transaction in which a third party funding source, known as a factor, purchases your outstanding receivables in exchange for a lump sum of capital less a percentage and/or fee. Unlike a loan, it does not involve the issuance or acquisition of debt.
Accounts receivable lenders typically advance 70% to 90% of the value of the outstanding invoices. Once your clients pay the invoices, you receive the remaining balance, minus the factoring fee.
Funds are often released in under 24 hours and borrowers are free to use them at their discretion.
Based upon the credit and past performance of your customers, as opposed to your business’s own credit profile, invoice factoring can be a pragmatic solution if you have poor credit or are in need of a quick, short-term infusion of capital.
Although accounts receivable financing offers several advantages, it is good to be aware of potential disadvantages. In particular, business financing through factoring companies
is typically more costly than financing through traditional lenders. Additionally, businesses who turn to factoring companies may be perceived, rightly or wrongly, as having poor credit or financial difficulties. However, perceptions aside, a fair number of successful companies use accounts receivables financing to keep their businesses moving.
Invoice Factoring Pros & Cons
Pros
- Frees up working capital quickly
- Saves time
- Requires no collateral
- Non-Equity financing preserves your business ownership
- Lower initial costs
- Easy to qualify
- Off-balance sheet debt preserves debt-to-equity ratios
- Not dependent on personal credit score
Cons
- Factoring fees are typically more expensive
- Lender may take control of collecting payments from your customers
- Perception of business in trouble
- Unpaid invoices may increase your fees and overall costs
- Interest rate and terms are based on your clients' credit and payment history
General Loan Information
Max Loan Amount
- Up to $250,000
Loan Terms
- Receivables due & payable in 90 days
- Flexibility and freedom to use funds as needed
Monthly Rate
- Factoring rates 1.5% to 6%
Other Details
- Your customers must have good credit
- No serious business tax or legal problems
- B2B and B2G invoices qualify
* If you meet these general loan guidelines, you will most likely receive loan offers for this funding product. Loan offers are preliminary based on the information evaluated, final funding amount offer may be adjusted during final underwriting.
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