Our latest & greatest infographic to provide a full scale breakdown of the how invoice factoring process works as an alternative financing solution.
Note: Full graphic transcript is provided below.
Account Receivables Factoring is a way your business can obtain the cash it needs to improve its cash flow, to manage rapid growth or to cover working capital expenses.
Factoring Receivables involves 3 separate entities:
- Your Customers
- Your Business
- The Invoice Factoring Company
Step 1: Your invoices are your assets. Instead of waiting 30-, 60- or even 90-days to collect on them from your customers, sell your most current invoices (aka receivables) to a third-party Factoring Company.
Step 2: Collect the bulk value of the amount due within 24-48 hours. You pay a fee or percentage (2-8 percent depending on the age of your receivables) to the factoring company for their expedited service.
Step 3: Your customers then pay their invoices, same as they always have
Advantages of Factoring Accounts Receivables:
- Get Your Cash Quick – Don’t wait around for customers to pay you. Get paid in days rather than weeks and handle your bills and business operations.
- No Credit Check Required – Factoring companies rely on the creditworthiness of your customers rather than your business so you can leverage their strength to get paid today.
- Take Control of Your Finances – Use the money from Receivable Factoring to manage your business as you best see fit, to pay bills, to improve cash flow, or to increase your output.
A Six-Point Comparison between Invoice Factoring and Small Business Loans:
- More expensive but more accessible to small businesses, including startups, not yet established businesses, and those with imperfect credit.
- Get the cash you need when you need it, within 2 days in most cases.
- No collateral required; your invoices serve as your collateral.
- Fast application process that takes less than an hour to complete in most cases.
- An independent transaction that does not appear on your balance sheet and therefore does not increase your debt.
- Manage the collection of the invoices from your customer.
VS. Small Business Loans
- Costs less but often inaccessible to startups, those with imperfect credit, and even some established businesses in good standing.
- Banks decide when you get your money, usually between 2-3 weeks.
- You must sign over your assets, property, equipment, and more as collateral
- A laborious application process requiring extensive documentation and paperwork. Generally takes several hours to do.
- By definition increases your debt and appears on your balance sheet. Must be paid back with interest over set period of time.
- Do not provide on-going services related to the term loan.
Get in the Know: Facts and Figures on Factoring Receivables
- Factoring Accounts Receivables is one of the world’s oldest financing methods going back thousands of years to the times of Mesopotamia.
- Though it has a long history with manufacturing and textiles industries, Accounts Receivable Factoring is now widely used across a myriad of industries, including: construction, oil & gas, freight & transportation, staffing & payroll, medical & medical equipment, government contracting and more.
- Invoice Factoring is estimated to be a $10 to $13 billion global business; though it is currently more popular in Europe and Asia, its popularity in the U.S. continues to rise.
- Accounts Receivable Factoring has increased 15 percent in the U.S. from 2004 to 2010 with a total invoice factoring volume at about 126,000 (in millions of dollars).
- Meanwhile, from June 2008 to June 2012, small business loans being lent dropped a whopping 83 percent from $336 to $56 billion.
How Business Factors & Finance Can Help Your Business
Talk to a Knowledgeable Invoice Factoring Representative
Our experts will look at the unique circumstances surrounding your business to help you figure out how factoring can help you improve your cash flow, working capital, manage your receivables and more. There’s no cost to speak with our representatives & they are available 24/7.
Manage Your Receivables with our Online Management System
Using a completely transparent process that is available online 24/7, clients who use our factoring services can stay on top of their receivables by logging on to our Proprietary Online Management System.
Take Advantage of Our Flexible Terms
With our invoice factoring services, you can decide which and how many invoices to factor, and you can change it month to month based on your current need and seasonal ups and downs. Flexibility keeps you in control of your capital!Sources: