Factoring is a form of financing that helps increase a company’s cash flow with slow paid bills. Usually, factoring companies buy customer receivables. With this purchase, customers immediately have access to funds that can be used to pay business expenses. This solution has many advantages and disadvantages (learn the advantages and disadvantages). Invoice qualification is relatively simple and can be done quickly. These advantages can make factoring receivables an ideal alternative for companies with new and growing cash flows. Please also keep a track of US bank holidays 2020 while doing all this.

Find a Company

Start the process by finding a company that meets your funding needs. There are many suppliers with experience in many industries. Find someone who has experience in your industry and who works with your customers. Evaluate your options and choose the best factoring company for your business.

Set up an Account

Setting up an account at a factoring company is relatively easy. You must review your contract and all legal documents. Once signed, the factor completes its due diligence, sends a UCC statement, and sends a prize notification. This process can take one to three days, depending on your circumstances.

Invest Your Money

After your account is set up, you can get funds. Typically, companies sell their claims to factors by presenting an account chart to them. The billing plan shows the bills you want to sell. After receiving the bill package, factor check your invoice and send you an advance. The down payment is the first installment of the purchase. Depending on your industry, advances vary between 70% and 95% of the gross value of your invoice. Most customers get their money through direct deposits, also known as ACH. ACH can take one or two days to delete your bank account. If you need money early, request a transfer. Bank transfer will delete your account in one business day or less.

Find Rebates

Factoring discounts govern transactions. Discounts are a second installment of transactions and can range from 5% to 30% of your bill depending on the amount of your initial deposit. Factoring companies handle discounts differently. Some distribute discounts after your customers pay in full. Discount other “packages” and offer them every week or on a different schedule.

Ongoing Financing

Companies usually issue invoices regularly. This practice provides them with current and predictable cash flows. The process is relatively simple. You send invoices and schedules for invoices. These factors process your invoice and you receive an advance. Once your customer pays you, factor in paying the bill and send you a discount.

Some things to remember

Most factoring companies buy bills in two installments. The first installment – prepayment – covers about 80% of the rights (this amount varies). The remaining 20%, less the factoring fee, will be returned as soon as your customer has paid the invoice in full. Here are the steps:

• You send a purchase invoice
• The factoring company will send you an advance (eg 80% of the invoice).
• Customers pay 30 to 60 days later
• Factoring companies will send you a discount (eg 20% ​​lower than the cost).

However, before you start to finance your bills, you must choose a finance company and create an account.