What Invoice Factoring?
We are here to help you find the best solution for your business and this includes explaining what factoring is and the different types. Many business owners are looking for ways to finance their company in a convenient and efficient way. Invoice factoring solves a wide range of financial issues as it helps to improve your cash flow.
Yet, so many business owners do not know what factoring is or how it can help. No matter the size of your company or the industry you’re in, as long as you use invoices, you can qualify for invoice factoring. Many business owners take advantage of factoring and no longer struggle with their cash flow. Invoice factoring is the best way to secure a consistent source of working capital.
Factoring is unlike a loan. It is debt-free, as it is a transaction. The factoring company purchases your invoices and gives you a cash advance at up to 96%. They then take on the responsibly to collect from your client and will give you the rest of the sum minus a factoring fee after it is paid.
How To Choose The Best Type of Invoice Factoring for You
There are many types of invoice factoring. Today, we are going to look at a few different types of invoice factoring so that you can better determine which one would be good for your company. While each type has small differences, they also have a common purpose: to get your business the working capital it needs from your outstanding invoices.
1. Non-Recourse Factoring
Non-recourse factoring is one of the most popular types of invoice factoring. This is because it allows you to sell your invoices without any credit risk. If the client doesn’t pay the invoice, this means that you will not be responsible for buying back the invoice from the factoring company. Once you sell it, it is off your hands and the cash advance is yours to do with as you please. This is why many business owners choose this option.
2. Recourse Factoring
Recourse factoring differs from non-recourse in that it doesn’t protect your credit from the risk of a client not paying. In this case, if a client doesn’t pay off the invoice, then your company will have to buy back the invoice. While this is more risky for the business owner, it may be a good option for you as it doesn’t charge as much as non-recourse factoring.
3. Spot Factoring
Sport factoring is a great option for businesses that need quick cash fast for just one transaction. For example, if you have a sudden bill or unexpected emergency, etc., that you need cash flow for, you can use spot factoring for one invoice to receive that money you need when you need it.
4. Small Business Factoring
Small business factoring is great for smaller accounts. If your business needs working capital to expand, then this type of factoring is perfect for you.
5. Payroll Funding
Do you find your company having difficulty meeting the payroll? With payroll funding you can make sure that you have the funds you need quickly.
6. Credit Card Factoring
This version of factoring helps you establish better credit. With credit card factoring, the company will give you cash advances on your future credit card sales.