Is Factoring Your Receivables a Good Idea a Small Business Owner?
Table of contents
- Is Factoring Your Receivables a Good Idea a Small Business Owner?
- Understanding Factoring Receivables
- What is the Factoring Receivables Process?
- Is Factoring Receivables Right for Your Business?
- What are the two types of accounts receivable factoring?
- What is factoring, and how does it work?
- What are the advantages of factoring receivables?
Understanding Factoring Receivables
What is Factoring Receivables?
Factoring receivables is a form of financing that allows businesses to get paid quickly for their invoices versus waiting 30 to 90-day payment terms. Accounts receivable (A/R) financing is an easier option than traditional bank loans or lines of credit:
- Qualify for funding based on your customer’s credit
- The only collateral you need is solid, unpaid business invoices (A/R)
- Receive funding within 3 to 5 days of giving your online funding application
- 100% remote application and funding process
- Debt-free financing with up to 93% cash advances based on your current receivable balance
When your business needs working capital, receivable factoring is the answer. With more risk management tools, you can secure working capital to grow your business. Once you sell invoices to Bankers Factoring, we protect unpaid receivables from customer default. Sell your receivables, receive protected working capital, and rely on our regular cash flow solutions to grow your company.
Please read our guide to accounts receivable financing.
What is the Factoring Receivables Process?
The factoring accounts receivable (A/R) process works like this:
- You, the company owner, sell your invoices to Banker Factoring (third party), who buys them at a discount.
- We pay you immediately and take over responsibility for getting payment from your customers (account debtors)
- Sell your unpaid invoices and receive up to 93% cash advances of your total A/R value.
Receivable factoring is an easy financing process for businesses. Instead of going through lengthy underwriting processes, you can receive debt-free working capital within a few days. Companies extending short-term credit terms must balance their receivables and payables. Cash flow management is more reliable with Bankers Factoring consistent funding services no matter when your customers pay the invoices.
Related article: What is Receivable Factoring?
Is Factoring Receivables Right for Your Business?
Factoring is a good option for businesses with high and low volumes of invoices. Factoring helps companies to reduce cash flow shortages by quickly converting A/R into cash by selling your invoices to Bankers Factoring. Selling invoices is a fantastic finance strategy for businesses seeking sales growth, balance sheet development, and new market entry.
There are many situations where A/R factoring is right for your business:
- Startup financing
- Unbankable businesses
- Financially distressed business owners: bankruptcy, insolvency, and protracted short pay
- Unable to keep up with payroll financing
- Bank Loan Turn Downs: How To Obtain Financing After Bank Loan Denial?
- You, the business owner, are funding operations with your savings
- A seasonal business model with unpredictable revenue cycles
- Economic uncertainty
You don’t have to wait for customers to pay for your goods or services; instead, you can get paid immediately. Factoring is a great way to raise money and build cash flow, especially if your business has many receivables that are taking longer than expected to collect.
Outsource your A/R department to Bankers Factoring. You receive fast cash funding, and we manage your collections and credit divisions. We help business owners focus on operations and growth rather than back-office administration.
Related article: Why Do Companies Use Receivable Factoring?
What are the two types of accounts receivable factoring?
There are two types of accounts receivable factoring companies.
The first is non-recourse factoring, also called without-recourse factoring. Non-recourse factoring funds your business and provides bad debt protection if your customers default on payment. Bankers Factoring is the best non-recourse factoring company for protecting your future cash flow.
The second type of factoring is full recourse or recourse factoring. In this agreement, you, the customer, are responsible for bad debt damages. Also, you, the factoring company, have the right to pursue your assets if your customer goes out of business.
Related factoring options article: Understanding Non-recourse Invoice Factoring
What is factoring, and how does it work?
Factoring is financing that includes selling your accounts receivable to Bankers Factoring and getting paid immediately. Your business receives fast funding during growth, change, and transition. If your employees expect weekly payroll, selling invoices provides the pay to retain top talent.
Steps in the factoring transaction:
- Complete an online funding application.
- Bankers Factoring confirms your invoices and begins the financing process.
- Within 3 to 5 days, you will receive up to 93% advance rate of your receivable balance.
- We pay the remaining balance less our small factoring fee once your customers pay in full.
Please read why use invoice factoring.
The main benefit of factoring is that it allows you to get cash quickly without waiting for customer payments, which can be terribly slow in some industries. For example, if your business wholesales merchandise to big box retailers, you require working capital to begin your operating cycle.
It would be best if you had cash flow when your business buys inventory, sells it to your customer, and receives payment up to 90 days after delivery.
Related article: What is Invoice Factoring and How Does it Work?
What are the advantages of factoring receivables?
Factoring receivables is a way for small businesses to get money quickly without waiting 30 days. It’s also a way for companies to get cash flow by getting paid sooner than they would otherwise.
- Risk management through non-recourse factoring – giving bad debt protection.
- Up to 93% cash advance rates within 3 to 5 days of finishing your application
- Fast funding for businesses strapped for cash
- Ability to increase staffing with not enough payroll funding.
- Free cash flow to grow your business through organic and acquisition transactions
- Financing for companies with bad credit – easy qualifying standards -not credit score is driven.
Related article: The Pros and Cons of Factoring A/R
When looking for factoring receivable companies, we hope this article helps, and you reach out to Bankers Factoring for award-winning non-recourse factoring receivables and the best financing option.