What is Invoice Factoring and How Does it Work?

Don’t Wait 30-90 days for Customers to Pay Outstanding Invoices.

Step By Step Invoice Factor Financing Explanation

What is a Factoring Company?

What is Accounts Receivable Factoring?

Invoice financing or factoring invoices is an alternative source of commercial financing. In fact, businesses can secure working capital financing by selling their invoices to a factoring company. Invoice factoring financing helps companies who struggle with the 30 to 90-day wait for customer payment.

Invoice factoring from Bankers Factoring provides businesses with immediate working capital to cover payroll and business expenses. So, accelerate your working capital forward by invoice factoring and receiving cash flow today.

We also have special programs for the federal government via government contractor financing.

Additionally, learn more in our previous article, “What is Invoice Factoring?“

Will Invoice Factoring Work for My Business?

Stop cash flow struggles by selling unpaid open invoices. How? By turning accounts receivables into cash flow financing by invoice factor financing. Why wait 30-90 days for your money?

All small businesses experience cash flow struggles, and business bank loans are hard to come by. Even the well-financed startup has periods where its cash inflows are weak. But invoice factoring solves the issues of slow pay from extended payment terms.

Accounts receivable factoring or factoring is another term for invoice factoring. Invoice factoring provides same-day cash flow financing for businesses struggling to meet same-day payroll financing.

Is using an invoice factoring company the right decision for your business?

Small Business owners and startups can turn unpaid customer invoices into fast cash with invoice factoring financing. So, if your business needs quick capital funding, invoice factoring is the right solution for the not-yet bankable.

Businesses that extend credit payment terms have issues paying employees and bills on time.

In addition, learn more in our previous article, “Same Day AR Factoring Financing.“

What types of businesses benefit from invoice factoring?

A/R Factoring is a universal business financing solution for businesses with B2B or B2G customers. Most industries benefit from selling unpaid invoices for immediate cash flow funding via invoice financing. However, businesses with cash flow struggle to remove funding obstacles by receiving payment today for their sales.

Here is a complete list of company types that can benefit from an invoice factoring company.

Business-to-business (B2B) sales companies benefit from invoice factoring. For instance, many wholesalers and distributors import products with low margins on high volumes. But this business practice causes disruptions in cash flow for the importing company. However, invoice factoring helps eliminate cash constraints when goods are paid for in the future.

As a small business owner, you can turn your unpaid customer invoices into fast cash with A/R factoring. This financing option is best for business owners whose customers are other businesses. Because these customers typically do not pay for goods or services immediately, invoice factoring can provide immediate cash for business owners to keep paying employees or other expenses.

How do Invoice Factoring Companies Work?

Invoice factoring companies also help businesses secure capital funding to accelerate business growth. Most small businesses do not qualify for traditional bank lending. But at Bankers Factoring, we provide an easy application process.

First, invoice factoring financing is contingent upon unpaid open invoices that can be sold to Bankers Factoring. Without invoices, there is no invoice factoring financing. The funding process also relies on the creditworthiness of the customer paying the receivables. We call our client customer, the account debtor responsible for paying unpaid invoices.

The four steps of the invoice factoring process include the following:

1. The client delivers goods or services to the account debtor and generates an invoice.
2. The client then submits an online funding application to Bankers Factoring.
3. Bankers Factoring qualifies your application and provides same-day financing of 80-93% of the total A/R or invoice value via wire to your business bank account.
4. Bankers Factoring then pays out the remaining open invoice balance less our small factoring once the account debtor pays.

Learn more in our previous article, “What is Factoring Financing?“

What are the advantages of invoice factoring financing?

Invoice factoring is a commercial financing facility for business owners with distressed finances needing quick working capital. Many small businesses lack the cash flow to keep up with weekly payroll and other expenses. Companies in a crunch for cash benefit from the quick same-day financing process with invoice factoring.

You can also read about the benefits of invoice factoring.

Invoice factoring provides a cash flow financing vehicle to cover operating and payroll expenses for the not-yet bankable business. Read more about how invoice factoring works.

The main advantages of invoice factoring include the following:

• No debt on your balance.
• We take on the credit risk – providing bad debt protection.
• Same-day cash funding up to 93% of total AR value.
• Access to unlimited working based on your open invoice value.
• Quick financing to cover payroll. Get paid faster.
• Low factoring fees start at .95% per 30 days.
• Businesses with poor credit qualify for funding.
• More predictable cash flow with instant invoice payment.

You can also read why use invoice factoring.

When should my business use invoice factoring?

If your business extends NET 30 or longer credit terms, invoice factoring can help remove your cash flow obstacles. You are forced to use your cash to fund operations when your business provides 30 to 90 days for customer payment. Not all companies have the working capital to keep up with one to three months’ worth of invoices.

Cash flow issues hurt payroll funding for most businesses. Bi-weekly payroll and salaries are one of the most significant expenses for companies. Ensuring staff retention is critical for business performance and success. Invoice factoring ensures your payroll is met on time each time.

It is common for seasonal businesses to have cash flow constraints. Due to spikes in demand during specific periods, enterprises need to strengthen cash reserves with invoice factoring. Specific industries and products see heavier demand during holidays or the winter and summer months.

Learn more from our previous article, “Seasonal Business Cash Flow Management.”

Common Invoice Factoring Terms

• Accounts receivable: open, unpaid invoices or the money owed to a business for delivered work or services.

• Account Debtor: entity responsible for paying open accounts receivable invoices and paying the factoring company directly.

• Factoring Line: the amount of financing provided through your invoice factoring agreement.

• Cash Advance: the initial cash funding up to 93% of the total AR value.

• Client: a business that sells invoices to Bankers Factoring.

• Discount: also called the rebate, the final cash disbursement that closes an invoice factoring agreement.

• Notice of Assignment: The Notice of Assignment in factoring is a legally binding notice sent to your customers advising them to redirect payments on client accounts to Bankers Factoring. Under the UCC laws, if a customer pays any other party, they have not relieved their legal obligation to pay the factoring company.

Visit our complete glossary of factoring terms.

What is the Bankers Factoring Invoice Factoring Financing Program?

Bankers Factoring provides invoice Factoring to Entrepreneurs and Small Businesses struggling to manage their cash flow. Invoice Factoring provides a working capital solution for your company. Our Non-Recourse Invoice Factoring provides A/R Insurance and access to unlimited working capital.

Business Owners can grow their business with Bankers Factoring. We help businesses with no working capital to develop consistent cash flow and improve business operations. We manage the receivable process and take on the credit risk if the invoice is slow or unpaid due to credit issues.

What is A/R factoring or factoring invoices?

• Same Day Invoice Factor Financing
• A/R Insurance provides bad debt protection through non-recourse A/R factoring.
• Cash advance of 80-93% of your invoice amount improves cash flow.
• Tiered Pricing for Startups with a lower factoring fee as you grow.
• Offer payment term to grow your business.
• Invoice discounting with low factoring costs.
• Weekly Payroll Funding for labor intensive business like staffing.
• Unlimited Access to Working Capital.
• Low factoring fees starting at .9-1.5% with an easy-to-understand invoice factoring cost.
• Free Credit Manager and we collect payments from slow paying customers.
• 24/7 online A/R reporting portal.

Ready for the owner-employees of Bankers Factoring to help you grow your company with our award-winning invoice funding services, including bad debt protection? Use our fast online factoring application or call the toll-free number 866-598-4295

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