Invoice Factoring FAQ: Why Factor Invoices?
Why do organizations unlock the working capital represented by unpaid customer invoices, instead of simply waiting for customers to pay?
Companies that factor invoices can focus on growing their organization instead of chasing invoices or performing collections. Saving time and money on accounting activities are only one benefit for companies that factor invoices. An organization might also choose to factor invoices when:
- They want to offer extended terms to their customers as a competitive advantage
- Immediate access to capital will enable them to take advantage of new business opportunities
- Faster cash flow will let them take on new business, serve larger accounts or fulfill bigger orders
- They have slow-paying customers who occasionally take 30 days – or longer – to pay
- They need to improve cash flow in order to meet operating expenses
- They want to negotiate discounts for early payment with their own suppliers and vendors
The opportunities lost by an organization during the time they wait for customers to pay is often referred to as “opportunity cost.” These include any activities an organization must forego or decline because cash flow isn’t keeping pace.
Invoice Factoring FAQ: What is Invoice Factoring?
Invoice factoring is a centuries old business finance tool which allows organizations that invoice their customers for payment to receive immediate payment by factoring them with a third party, called a Factor, for a small fee, called a factoring fee.
Invoice factoring has several synonyms, and is sometimes referred to as:
- Receivables financing or receivables factoring
- AR factoring (or A/R factoring)
- Accounts receivable or account receivables factoring
- Invoice financing, invoice discounting or invoice factoring
No matter which term is used to refer to the process, invoice factoring is a financial transaction whereby a business factors a customer invoice with a third party – called a Factor or Factoring Company – for a small fee. We can help you find companies that offer low invoice factoring fees starting from 5% and advances ranging as high as 90%.
Invoice Factoring FAQ: What sets the best invoice factoring companies apart?
We believe the best invoice factoring companies seek to minimize the cost of factoring while maximizing the benefits of factoring receivables for their clients. They earn their clients’ business, day in and day out with competitive factoring rates, flexible options and superior customer service.
Every factoring company offers unique perks that might make it more or less appropriate for your organization’s factoring needs. Some of the things we can help you find are:
- Experienced teams – our team has decades of business finance experience, and we put this expertise to work for our clients
- Low factoring fees and high advances
- Fast approvals and high approval rates – companies that look for reasons to say “yes!” instead of no
- Fast funding
- No hidden fees that jack up the cost of factoring
- Flexible options that keep you in control (no factoring minimums, no long-term contracts)
- Add-ons like free credit checks on your customers
- Industry discounts or industry-specific benefit programs