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Factoring your accounts receivable can provide you with quick cash if you're having trouble getting a loan for your business. Here's how factoring works:
A factor provides a cash advance based on the total value of the invoices that you provide as collateral. You typically receive 80% of the value of the invoices upfront. Then you receive the remaining value once the client pays the factor, minus a factoring fee — typically three to five percent of the invoice value.
To be a candidate for factoring, you can't have existing primary liens on your accounts receivable. Essentially, this means that no other company should have a claim on payments when they come in. Your customers must also be creditworthy so the factor can be ensured your clients will pay their invoices.
Make sure you review each factoring company's pricing structure. Factors will vary based on their deposit or application fees, advance rates, and monthly minimums. You also want to find out if the factor requires monthly contracts and if you incur penalties if you break it.
How factoring works, who offers the services, and how to choose the best factor for your business. (Source: BuyerZone.com)
How Factoring Commissions Work
Learn how to use factoring to pay for real estate broker commissions well in advance. (Source: Move.com)
The Full-Service vs. Bank Factoring Decision
When it comes time to factor your accounts receivable, you have multiple options. Find out which works best for your company. (Source: 1st Commercial Credit)
How to Apply For a Factoring Loan
Information on how to start the application process for a factoring loan. (Source: Ezinearticles.com)
- accounts receivable factoring
- accounts receivable financing
- factoring companies
- factoring service
- invoice factoring
- invoice financing
- purchase order financing
- receivables factoring
- receivables financing
- 1st Commercial Credit
- 21st Capital
- CIT Group
- J&D Financial
- Rexford Funding
- Winston Financial Group
Points to consider when purchasing:
- How much would you like to factor each month in receivables?
- What is your average invoice amount?
- What is the average timeframe to collect on your receivables?
- What size business do you generally invoice?
- What type of products do you sell?