Invoice factoring improves cash flow by enabling companies to immediately access the cash that is tied up in their open receivables. Invoice factoring delivers convenient, cost-effective access to working capital in as little as 24 hours.
Companies using invoice factoring have the financial strength to meet day-to-day operating expenses and take advantage of new business opportunities. Because factoring is not a loan, it’s ideal for companies that do not qualify for financing from a traditional lender.
Before we discuss exactly how invoice factoring improves cash flow, let’s first start with an explanation on how it works.
Invoice factoring is a very simple process. A company sells its open invoices to a factoring company in exchange for a cash advance. Most cash advances range from 80 to 90 percent of the value of the invoice, although the advance amount may differ depending on the industry.
Once an invoice advance is paid, the factoring client uses the cash to meet whatever financial obligations they have. The factoring company will forward the invoice on to the client’s customer, who then processes and pays the invoice in normal terms. When the invoice is paid to the factoring company, the remaining balance is remitted to the client, less a factoring fee.
Companies that use invoice factoring have a distinct advantage when it comes to cash flow. By sending invoices to the factoring company on a regular schedule, a company can schedule their accounts payables and no longer worry about missing payments or late fees. With cash from invoice factoring, even surprise expenses are easily covered.
Invoice factoring improves cash flow because it gives you the opportunity to concentrate on expanding productivity and profitability in your business. If your goal is to grow your business, your factoring line can increase as your receivables grow. Factoring is the right choice for financing if you are interested in maintaining a stable, profitable company.
There are many key benefits of invoice factoring. First, is the improved cash flow from factoring. Secondly, factoring is not a loan, so no additional debt is created. Another benefit of factoring is the additional services a good factoring company offers to clients. At Scale Funding this includes credit checks on new customers, online reporting, dedicated relationship managers, and professional collection services.
Qualifying for invoice factoring is relatively easy. Factoring is based upon the credit of the debtors, not the factoring client. If your business works with companies that have a positive credit and payment history, factoring is an ideal financing solution.
Setting up a factoring account with Scale Funding takes only a few steps. First, talk to a Scale Funding representative about your cash needs and how quickly you need to be funded. Our representative will provide a free, no-obligation quote on a factoring program.
Once you have agreed on a factoring program, the next step is to set up your account. The New Business team at Scale Funding will work with you to gather the necessary documents and quickly resolve any issues. Account set up can be done in a little as two days but may take longer depending on the circumstances.
Once your account is funded for the first time, you are good to go. Moving forward, simply send in your invoices and related paperwork, and you will be funded the same day.
For more than 20 years, Scale Funding has been helping companies improve cash flow with invoice factoring. If you’d like to learn more about our factoring solutions, contact Scale Funding today by calling (800) 707-4845.