FACTORING
Factoring is a very popular way for businesses to get paid while they wait on their clients. An investor, called the “factor” purchases your outstanding invoice and advances you cash in return for managing collection from that client once it has been satisfied- all without taking any loss or risk yourself! The process can be as simple as sending over an offer letter with terms set out clearly which will give them access only after signing; but there might also exist more intricate Factorage Agreement forms where each party specifies responsibilities regarding how much time needs pass before funds become available again after being used by either party during negotiations.
Overview
Factoring allows businesses to continue operating while waiting for cash from their customers. The process typically takes 30 days, 60 days or even 90+ in the fashion industry which presents an issue when there are more materials needed per next customer’s order but factored into prices instead of delayed operations until then you don’t have that problem.
Factoring is a flexible financing option that can offer many benefits, but it also comes with some drawbacks. The factor will purchase your accounts receivable and then lend you money based on how much they are owed generally up to 95% of what’s been outstanding so far! Factors approve loans quickly (often within just days) which means there isn’t too much risk involved if things go wrong between client/factor partner since he’ll get his cash right away without waiting any longer than necessary, unlike other types of loan where clients need delays before receiving funds due them because these need to go through a regular bank first. However, factoring also means that your business’s customers will now be making their payments to the factor instead of directly to you which can complicate things if there are any issues with payment down the road.
Factoring can be a great source of funding for new businesses that haven’t built up a strong credit history yet. Because factoring doesn’t rely on your business’s credit history, it can be a great option for businesses that are just starting out. Factoring can provide you with the working capital you need to grow your business, without the burden of high interest rates or strict repayment terms.
LOAN HIGHLIGHTS
- Factoring is a great way to get cash while your business grows.
- That's right, factoring is the responsible for collecting from your client.
- The approval process for a factoring loan is very fast.
- The key to factoring is that it works best when the business owes you a lot of money.
Disadvantages
- Factoring loan terms are usually just a matter of months, which makes factoring an ineffective long-term solution to cash flow problems.
- The factor is a hassle because it affects your client relationships.
- You can only factor one invoice per loan.
Advantages
- Factoring has the potential to cover 95% or more of what you are owed.
- You can rest assured knowing that your business doesn’t have to worry about collecting from the client.
- You may not have the best credit history or enough money to borrow, but that won't necessarily stop you.
Quick Application
Use our five minute application to get a clear understanding of your funding options, terms, and interest rates.
