Cash reserve options for smaller businesses are usually very limited. Whether it’s a start-up business or an already established one, they tend to have little credit history. In this scenario, banks typically express their inability to help, this makes financing through spot factoring quite a viable option. So, just move on from the frustration you might have gone through due to the lack of funds, and look for opportunities to grow your business.
The concept of factoring is specifically designed for small businesses. This is because small businesses sometimes need urgent cash for daily business expenses, before their customer pays their outstanding amount. It typically takes 15, 30 or 45 days for or more for the customers to pay their invoices. Why wait on your customers? Now you can sell your invoices to a factoring company by paying just a discount fee. The discount fees (usually 2.5% to 7.0%) are typically based on the percentage of the invoice amount paid as advance, the ageing of the invoices, and the value of the invoices. If a company sells products/services to its customers that generate invoices worth $40,000 payable in 30 or 45 days, they become accounts receivables for the company. This invoice is then considered as an asset to the company. Though before the 30 or 45 days are complete, and the company receives payments from the customers, it needs short-term working capital to meet payroll expenses. To get funds, the company can sell that invoice to a factoring firm and get an advance between 40% and 90% of its value (40-90% of $40,000).
The process of spot factoring deals in a single invoice. In the example above, factoring was done on a single invoice worth $40,000. Basically it’s about financing one invoice instead of multiple invoices. Once a company sells an invoice at a discount, the factoring company will later collect the full invoice amount from the customer on the collection date.
With the usage of A/R financing or spot invoice discounting, all the financial blues that small businesses face will go away. This is a great long term funding solution rather than an ad hoc arrangement. There is no minimum commitment as such for transaction. Even if the transaction was only for a few thousand dollars, a factoring company will gladly finance that against an invoice. So, there’s no waiting to receive payments from customers or go through the anxiety of loan rejection from banks any longer. Invoice factoring will take the financial burden off your shoulders.
The concept of factoring is specifically designed for small businesses. This is because small businesses sometimes need urgent cash for daily business expenses, before their customer pays their outstanding amount. It typically takes 15, 30 or 45 days for or more for the customers to pay their invoices. Why wait on your customers? Now you can sell your invoices to a factoring company by paying just a discount fee. The discount fees (usually 2.5% to 7.0%) are typically based on the percentage of the invoice amount paid as advance, the ageing of the invoices, and the value of the invoices. If a company sells products/services to its customers that generate invoices worth $40,000 payable in 30 or 45 days, they become accounts receivables for the company. This invoice is then considered as an asset to the company. Though before the 30 or 45 days are complete, and the company receives payments from the customers, it needs short-term working capital to meet payroll expenses. To get funds, the company can sell that invoice to a factoring firm and get an advance between 40% and 90% of its value (40-90% of $40,000).
The process of spot factoring deals in a single invoice. In the example above, factoring was done on a single invoice worth $40,000. Basically it’s about financing one invoice instead of multiple invoices. Once a company sells an invoice at a discount, the factoring company will later collect the full invoice amount from the customer on the collection date.
With the usage of A/R financing or spot invoice discounting, all the financial blues that small businesses face will go away. This is a great long term funding solution rather than an ad hoc arrangement. There is no minimum commitment as such for transaction. Even if the transaction was only for a few thousand dollars, a factoring company will gladly finance that against an invoice. So, there’s no waiting to receive payments from customers or go through the anxiety of loan rejection from banks any longer. Invoice factoring will take the financial burden off your shoulders.