Frequently Asked Questions about Invoice Factoring
Accounts receivable factoring, also known as invoice factoring, is the process of selling your active invoices to a factoring company for a cash advance.
- Your business submits unpaid invoices for completed work.
- The factoring company verifies those invoices and advances you up to 95% of the funds within 24 hours. The rest is kept as reserve.
- The customer pays the invoice amount to the factor.
- The factor releases the rest of the reserve to you, minus a small factoring fee.
Factoring has been around for thousands of years. The ancient Phoenicians and Romans were both known to use primitive forms of factoring. The pilgrims’ journey to America was financed by cash advances provided by a factor. The practice is the same, but the method has changed slightly over time.
No. Factoring is a way for your business to turn unpaid invoices into cash.
- Invoice factoring is fast. Most companies receive their payment within 24 hours of being approved for factoring.
- Approval is based on the credit strength of your customers.
- Factoring is not debt, unlike a bank loan that has to be paid back.
- There is no funding cap using accounts receivable factoring.
- Startups can use factoring as long as they have invoices.
Yes. There is both recourse and non-recourse factoring.
With recourse factoring, your business must buy back receivables that the factoring company wasn’t able to collect payment on. With non-recourse factoring, the factoring company takes the risk of your customers not paying. Due to that, non-recourse factoring fees are a touch higher.
Yes. Business-to-consumer transactions are not eligible for invoice factoring.
Yes. The factoring company will look to the credit of your customers when deciding who to fund. Unlike a bank loan, the credit of your business is not held against you.
No. Factoring is a virtual service — Everything can be done over the phone, e-mail, fax, wire and mail. This means your business can be located in any city or state and still quality for accounts receivable factoring.
It might be. Eligibility is determined on a case-by-case basis when it comes to tax issues.
Yes. Factoring companies will consider doing business with those considering Chapter 11 bankruptcy.
- An accounts receivable aging report.
- A list of your customers.
- A list of the invoices you want to factor.
- Articles of Incorporation.
No. Factoring is a service that can be started and stopped whenever you want without penalty.
No. You can pick and choose which invoices you would like to factor.
Yes. It’s deductible as a business expense.
Yes. That information will be disclosed to them via the factoring company.
You don’t have to. The factoring company you choose will tell your customer you are factoring your account receivables.
The factoring company will let your company know where they will be sending their payment.
The factoring company sends your advance to your account directly using either wire or ACH bank transfer.
- The factoring company takes on billing and collecting responsibilities.
- Your business can get the cash it needs faster than it would if it used another funding service.
- Factoring financing grows with your sales.
- It eliminates the overhead associated with collections and processing invoices.
Consider Factoring Companies a matchmaking company. Instead of pairing couples, we pair your business with the factoring company that best fits your company’s wants and needs. We understand that time equals money. So we’re here to save you time finding a factoring company that meets your business’ requirements.
- We save your company time. We search for the best factoring company to serve your business so you don’t have to.
- You don’t pay for our services. We are paid by the factoring companies within our network.
- It’s easy. All your company has to do is fill out a form or give us a call to start factoring. We take it from there.
- It’s safe. We are a certified company that has served thousands of happy customers.
- It’s stress-free. Factoring means your company doesn’t have to deal with billing or collecting.
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