Invoice factoring is a financing solution where a business sells its open receivables to a factoring company in exchange for immediate cash. Instead of waiting for customer payment, factoring provides you with immediate working capital so you can catch up on bills, meet payroll, maintain daily operating expenses, and grow your business with ease.
The process is very straightforward. A business provides work, services, or products to their customers. When the customer is billed, the unpaid invoice is sent to the factoring company first. The factoring company advances the business, a percentage of the value of the invoice, generally 90%, that same day.
The invoice is then sent on to the customer, who processes and pays it in their regular terms. The customer then pays the factor. Once the customer pays the invoice, the remaining balance, less a factoring fee, is remitted to the business.
Invoice factoring supplies companies the immediate cash they need to not only operate their business but also to grow. Factoring is not a loan, so there is no debt created by it. The eligibility is based on the credit and payment history of a business’s customers, not that of the business itself. This is one of the many benefits of factoring for companies that might not qualify for traditional lending or don’t want to increase their debt.
At the foundation of a relationship with an invoice factoring company is the factoring agreement. The agreement is the contract between the client and the factoring company. These typically include:
The term of the contract varies depending on your program. At Scale Funding, we offer month-to-month contracts and 12 month contracts depending on the situation. Be sure to ask your potential factoring company questions and read through the contract thoroughly prior to signing.
Most agreements will include a volume commitment. By committing to factoring a specific volume of invoices, a company can receive the maximum advances and lowest rates to optimize their cash needs.
In most cases, an invoice factoring company, would advance you anywhere from 70 percent and up of the invoice amount. The amount advanced is based on variables such as your customers’ creditworthiness, pay trends, and volume. Scale Funding offers competitive advance rates. Inquire today to see how much we can advance you.
A factoring company’s fees vary based on items such as volume, the size of your invoices, your industry, customer pay trends, and other variables. Some factoring companies charge a flat fee for the service, whereas others may have a factoring fee and additional charges for other administrative and support services they provide. Be sure to read the fine print of your contract so you know exactly how much you’re being charged, and ask questions. To learn more about factoring fees, use the invoice factoring calculator.
Since 1994, Scale Funding has provided best-in-class factoring services to thousands of small to mid-sized companies across the United States. We offer reliable cash-flow solutions, enabling companies to meet the challenges they face and the opportunities they have available.
Our customers work on the front lines of North America’s growth sectors. They choose us for the working capital they need because our process is simple and straightforward.
Our easy to set-up factoring lines allow customers access to the working capital they need, quickly and easily. A factoring quote can be done in 15 minutes and funding within 24 hours. We distinguish ourselves from others through our get-it-done culture, reliability, flexibility, and award-winning customer service.
To apply for a custom invoice factoring program, fill out the form below or give us a call at 800-707-4845. In as little as 15 minutes, we’ll provide a free no-obligation consultation and quote for a custom factoring program to meet your business demands.