Is Business Factoring a Loan?
What is a Business Factoring Company?
Example Business Factor Transaction
What do entrepreneurs, startups, and growing businesses do when they’re having trouble meeting payroll and keeping working capital flowing? Stress about cash flow plagues many, causing sleepless nights and endless pressure.
Luckily, there is a solution to these problems if you have solid invoices 30 days or older: business factoring using your accounts receivable with Bankers Factoring (Bankers).
You can also read our article about business factor financing for small business.
How Does Business Factoring Work?
Waiting 30 days to 90 days for payments from customers can hurt a business that needs cash flow now. By selling invoices to a factor financing company like Bankers, businesses can create fast and safe working capital where they otherwise would not be able. After businesses sell their invoices to a business factor, the factor will provide the business with a cash advance within a remarkably short turnaround.
When working with Bankers Factoring, we are able to provide same-day funding after your account is set up. Bankers handles the invoice verification and collects the payment directly from your business’s client. After the invoice is fully paid, Bankers issues you your earned factoring reserve.
This process allows businesses to grow and thrive, and to reach their full potential without financial problems holding them back. Working with Bankers Factoring, we will guide you through credit, cash flow, and issues with growth.
Read our invoice factoring FAQ for more information.
Is Business Factoring a Loan?
Unlike a line of credit from the bank, business factoring or invoice factoring is the sale of your invoices to a factoring company like Bankers Factoring. With Bankers, the sale of your invoices is on a non-recourse basis which means we take the credit risk. If you have an SBA loan, we can still probably help as we have had the SBA lender subordinate to us in the past.
Is Business Factoring Safe?
Yes. In fact, it is one of the safest ways a business can gain quick access to funds and generate a sustainable flow of funds. When working with a factoring company, like Bankers Factoring, you secure same day funds for your business without the risk of credit loss and waiting 30-90 days. You also stay debt free by avoiding bank loans and diluting your ownership by not giving up equity.
The best invoice factoring companies will take on your credit risk when dealing with your customers, and Bankers Factoring is a non-recourse factoring company. These types of companies that provide bad debt protection are called non-recourse factoring companies. If your client files for bankruptcy or goes insolvent, Bankers Factoring will absorb that risk.
When working with Bankers Factoring, we care as much about your business as you do, and work closely with you to create the best possible outcome for your business. Find out more about why you should choose Bankers Factoring.
What’s the Difference Between Bank Loans and Business Factoring?
More businesses are deciding to pursue business factoring services instead of traditional bank loans. But why is this a better solution?
- No Debt Acquired
- Cash is Advanced Up Front
- Receive a high percentage of the invoice
- Not balance sheet driven
- Most small business loans are turned down
- Factoring rates are similar to swiping a credit card
- Not personal credit score driven
- Not just a short-term liquidity answer
- Flexibility in Terms
- Accessible Approval
- Fast Funding
You can also read invoice factoring versus a bank A/R line of credit.
When dealing with a traditional bank loan, businesses acquire daunting debt and now have the extra stress of a strict timeline to pay back the money. Bank loans also can often take months to get approved, and when dealing with factor invoice financing, the factor pays the cash advance of 80-93% with a discount for your invoices upfront, and you have immediate access to the cash you need.
Many times Bankers Factoring and banks will work together to help their mutual client.
Bank loans also often have hard-set limits on how much you can borrow that cannot change, but factor financing companies will work with your company and adjust the terms based on the most current state of your business.
Many small and medium businesses or contractors have trouble getting approved for business loans, especially those with less-than-desirable credit or who are just starting up. Small businesses have an extremely high turndown rate when it comes to a line of credit from a bank or credit union.
Please read our article on how to obtain financing after your business loan is denied.
Non-Recourse Business Factoring
When working with factoring, the client who bought the businesses’ credit is checked, and not the businesses selling the product themselves. This opens the door for those under this demographic to have access to working capital when they otherwise would not be able to access a bank loan.
A bank loan is risky and challenging for businesses to manage. They require a personal guarantee and put businesses and their personal livelihood at risk. Invoice factoring is a much better route to take.
When an expert factoring company becomes your financial partner, they assume the risk and help manage the process of dealing with the cash and the transaction.
The factoring financing option is advantageous for businesses that can benefit from expert business consultation.
What Factor Fees are Associated with Business Factoring?
Fees associated with factoring vary among factoring companies. When working with Bankers Factoring, our advance rates are top of the game, running from 80-93%. Once we receive the payment on your invoices from your client, we will provide you with the remaining balance, minus a fee of 0.9-1.9% per 30 days.
For example, if the invoice you sell us is $10,000, and we issue you an 85% cash advance of the invoice amount with a 1.6% advance fee, you will receive $8,500 at funding. Once the payment from the client is received, you will receive the balance of $1,500 minus $160 (1.6%) if paid in 30 days.
Don’t wait 30-90 days to receive the working capital that you need when the customer pays. Turn unpaid invoices into fast and safe liquidity. Let Bankers wait for your clients to pay their invoices. Realize the value of your invoices months sooner with our accounts receivable financing and invoice factoring service.
What Industries are Invoice Factoring Perfect For?
Invoice factoring caters to many industries, and there are many types of businesses that regularly utilize invoice factoring from Bankers.
- Cable & Telecom
- Food & Beverage
- Oil & Gas
- Payroll & Staffing
- Tech Company
- Wholesalers & Importer
- Wine & Spirits
If your business is in any of these industries, business factoring from Bankers is a viable option for you to keep cash flowing through your company.
Factoring for Businesses is only a few Minutes Away.
Complete the Bankers-Online-Factoring-Application in 7 minutes to get working capital from Bankers Factoring, one the best PO financing company and A/R factoring companies. A bank business loan turndown is not the end. Let Bankers meet your working capital needs by using your accounts receivable to open a factoring line of credit. Enjoy a low factoring fee, our family atmosphere, and great customer service from your dedicated account executive.