Small Business Factoring Financing

Do you sell products or services to commercial or government
customers? If you do, then you must be very familiar with having
to wait 30, 40 or even 60 days to get paid by your clients.

Most large businesses can afford to wait. Unfortunately, few
small business owners can afford to wait – and worse – most
small business owners do not take into account that they will
have to wait to get paid when they first start their businesses.

But what if you can’t afford to wait 60 days to get paid? The
best solution is to factor your invoices.

Factoring is a financial tool (similar to a line of credit)
that eliminates waiting to get paid by your clients. Factoring
financing provides you with money for your invoices, usually 24
hours after you submit them. It provides you with the necessary
cash to pay rent, expenses and take on new opportunities.

Invoice factoring is an ideal tool for cash intensive
businesses such as trucking, staffing, business services,
medical offices and IT. It works as follows:

1. You deliver a product or a service and generate an invoice
2. You submit the invoice to your client and send a copy to the
factoring company
3. The factoring company advances you up to 85% of your invoice

4. The remaining 15% is held as a reserve to cover charge backs
and credits
5. Once your client pays the factor, the transaction is settled
and the reserve is rebated (less a small fee)

And how much does factoring cost? It varies on your business
volume, how long your clients take to pay and their credit
worthiness. Most factors will charge a fee of anywhere between
1% and 2.3% for every 10 days that an invoice is outstanding.
However, fees vary and can usually be customized to fit your
needs.

The biggest difference between invoice factoring financing and
a bank loan is that factoring is easy to obtain. Since the
factor is financing your invoices, their biggest concern is that
you do business with strong credit worthy businesses. This means
that factoring is available to small and new businesses,
provided that you have good clients. And as opposed to a bank, a
factoring company will not ask you for endless financial reports
and three years worth of audited financials.