Invoice Factoring Companies

Written by Patricia Tunstall
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If you have had to refuse new business because of a crunch in cash flow, it is time to look into the services offered by invoice factoring companies. When your bank turns you down for traditional loans and financing, check the features of accounts receivable financing, or invoice factoring, offered by progressive factoring banks. Perhaps your customers are too slow to pay, or are overdue in their payments, and you are having trouble meeting your payroll or paying your own bills on time.

Whatever the reasons for your cash flow concerns, invoice factoring companies provide cash for the accounts receivable of your slow-paying customers. Terms differ among companies, but they generally offer 60-90 percent of the face value of the invoice up front--with immediate cash to you--and give you the remainder, minus fees, when the customer pays the bill. When you open an account with invoice factoring companies, it may take five-10 days to get the account set up. Once that is settled, however, advances on the invoices themselves take place within a day or two.

The Mechanics of Factoring

The flexibility of factoring is epitomized by the choices you have about presenting invoices. There is no minimum or maximum, once you have signed on with a company. Often, an available option is spot factoring, in which you submit only one invoice, one time. At any rate, you receive reports on the status of the accounts receivable you have sold to the financial institution.

Your customers make out their checks to you, but are instructed to send them to the financial institution. Should they not pay, for whatever reason, the institution acts as a collection agency. Individual businesses often have trouble convincing customers to pay their invoices, but banks, especially, are far more persuasive. They have the weight of their prestige and credit-reporting capabilities behind their calls for payment.


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