Can a factoring company help you grow your business?

If your small, medium, or large company is struggling with cash flow and increased orders, you may want to consider a factoring company. Factoring companies work with businesses to provide them quick access to up-front cash in order to grow their business. Sounds complicated? It's not! This blog post will tell you how it works and how the process can benefit your company.

In under an hour from now, you could have up to $1M in extra capital for your business — that's enough money to hire employees or make necessary equipment purchases.

Factoring is a fast, painless, and inexpensive way for you to access the capital you need. The process is also easy to understand. Here's how it works:

1. Your company receives invoices or sales that you can't afford to pay right away, or your credit card limit will prevent you from doing so.

2. You can apply for a factoring invoice at any time (usually within 3-5 days), and start earning the money on those invoices immediately while they are being paid.

3. Factoring companies provide you with the money in the form of a non-recourse factoring line-of-credit.

4. You can use the funds at your discretion and make purchases that will bring you more business or increase your inventory.

5. Once your invoices are paid, the money is sent to you via ACH credit on your account (day of settlement).

6. There is no out-of-pocket cost to open or maintain an account with a factoring company – so it's free!

7. To receive funds from your factoring line-of-credit, you must wait for invoices to be paid (usually 30 days).

8. Factoring companies are not here to rescue you from credit card bills, or help you pay for business equipment. If you want help with that, look elsewhere. Factoring is strictly a one-time investment and should not be used as a crutch or a panic stopgap.

There are several types of factoring companies, but the most common is what we call 1099 — which stands for "1099 Contract" because this type of contract enables a business to receive payments from its customers on which the company does not have to withhold taxes and send the payments to the government.

Like a traditional invoice, the payments received from a 1099 Contract can be used as working capital by the company and should be invested in inventory or capital equipment.

Need more information on how to become a factoring customer, or about how you can find the right factoring company for your needs? Feel free to contact me via e-mail or phone.

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Title: Are You Looking For A Factoring Company? Find Out Why Your Business Needs One!

                                    

Can a factoring company help you grow your business? That's what this article will tell you.  In under an hour from now, you could have up to $1M in extra capital for your business — that's enough money to hire employees or make necessary equipment purchases.  Factoring is a fast and easy way for your business to get the cash it needs without all the hassle of writing a bunch of personal checks. 

                Factoring, also known as invoice factoring is the process of using a third party to facilitate the sale and assignment of your invoices.  When you invoice, you initiate a sale.  The factoring company buys this invoice, or collection rights to it, and then collects on it.  They charge a fee for this service based on how much you are owed.

                Let's say you sell office equipment for a living and have been assigned to collect $10K from a client that owed that sum from an invoice issued one month ago.  You have a laptop, a fax machine and an overhead projector that your client decided they didn't need.  So, you send the invoice out and wait.  After one month, you call the client to find out that they never paid you and they want the equipment back.  The factoring company buys this invoice from you for $10K due on it. While you have your equipment back, the factoring company will use those equipment to sell to other clients who are in need of such products for their businesses.  For every sale made off this invoice, the factoring company will charge you a fee based on how much is owed from it (what's known as a "factor fee").  You will keep the money from each sale and it is paid directly to you.  This fee is often 10-30% of the bill, but varies by company.

                This cycle repeats for each invoice issued by your company, allowing you to earn money on invoices that you would have never had the opportunity to collect otherwise (if your customer simply did not pay).  Sometimes, this business model can be used by small businesses to grow quickly and efficiently.  The same process of buying a collection right allows these companies to build a stable and growing customer base.

                Let's say an accountant needs office equipment for her business that is as common as a three ring binder.

Conclusion

The amount of money that you could make on invoices with this business model, as Bill Sweetwood and his colleagues have proven, is enormous.  For example, a factoring company can make $15K on a $100 bill if they sell the collection rights to an invoice.  That's quite a bit of money in a very short amount of time.  Hopefully this article will shed some light on how factoring works.  If you'd like to learn more about this business model and how it can benefit your company, feel free to contact me via e-mail or phone.