Are you looking for a way to eliminate cash flow problems in your business without the hassle of going through a bank? Factoring is the perfect solution to get your business the cash it needs – fast. We have compiled a complete guide to what factoring is and how the process works. Keep reading to find an invaluable resource to help your company grow larger than ever before.
1. Get Started With a Business Representative
Are you wondering, “who is a business representative?” A business representative is your invoice factoring representative that will help get the cash you need. Depending on your industry, your business representative will choose the right factoring services based on your needs. For example, say you needed $10,000 for your trucking business. This can be for anything such as poor cash flow, rapid growth, slow cycle of business, or recovery from a large bill. Your business representative will be able to help assess your outstanding invoices to come up with the best transportation factoring service.
2. Fill Out An Application
After you have spoken with your business representative, you will fill out an application for your services. This is not like a bank application. This typically takes less than 15 minutes to complete. Factoring companies typically look at your client relationship history, rather than your personal or business FICO score. When you are filling out your application, you should always provide your most recent invoices from the most reliable clients.
3 .Getting Approval
Because factoring companies look at your personal client relationship, they will look at your client’s credit score, rather than your own. This is the key difference and one of the biggest benefits of factoring. Factoring companies focus more on your clients’ good standing than you own.
4. Processing Your Information
After your application has been accepted, your factoring company will process your business information. They will take into account your personal business needs to start purchasing your invoices in the fastest amount of time. Your business representative and factoring company will get you an advance of up to 96% of the total amount on your invoice so that you can get as much cash as possible – fast.
5. Getting Your Funds
After your information is approved and processed, it is now time to get your funds. Your business representative will work with you to determine the best way for you to get the funds you need. Typically, most clients prefer direct deposits.
After your money is in your pocket, it is yours for spending. Spend it however you see best fit for your business. The factoring company cannot and will not dictate how or where your money will be spent.
6. Your Clients
Factoring companies care about your clients. Instead of your clients paying you their invoice to you, they will mail it to the factoring company similar to mailing it to a bookkeeper service. When the factoring company receives your payment, they will deduct their factoring fee and rebate difference.
It is important to note that because you are using a non-recourse factoring company, you will not be at risk if your client defaults of payments. This credit protection is a great advantage to businesses. You will also not incur any additional debt with factoring since you are only getting an advance on funds that are owed to you.
We hope that this guide will help you better understand factoring services. Unlike a bank, a factoring company allows you to get the money you need faster then ever before, while also staying free of debt. Take advantage of the many benefits of factoring to help eliminate cash flow – for good.