Is Invoice Factoring the Solution for Your Cash Flow Issues?
Table of contents
- Is Invoice Factoring the Solution for Your Cash Flow Issues?
- What is Invoice or A/R Factoring?
- Two Types of A/R Factoring
- How A/R Factoring Works
- Four Steps of A/R Factoring
- Receivable Factoring Example
- A/R Factoring Example
- What are Factoring Fees?
- The main criteria for Invoice Factoring include the following:
- The Bankers Factoring Advantage
- Factoring invoices will give you the following:
- Ready for the owner-employees of Bankers Factoring to help you grow your business with invoice factoring? Use our fast online factoring application or call the toll-free number 866-598-4295
Invoice financing turns your unpaid invoices into fast cash.
Turn 30, 60, or even 90-day-old invoices in cash today with invoice factoring financing.
Entrepreneurs spend countless hours fundraising and securing lines of credit, especially with slow-paying customers. Business Owners can turn their unpaid invoices into fast working capital quicker than obtaining a bank loan with invoice factoring. If you are extending payment terms of NET30 or higher, we can help your cash flow crisis by articulating your open invoices.
Bankers Factoring Invoice Factoring program buys your unpaid account in exchange for up to 93% of the total value the same day! Invoice Factoring helps solve short-term struggles like payroll funding and monthly expenses.
Visit our previous article, “12 Common Cash Flow Problems and Solutions,” to learn more.
What is Invoice or A/R Factoring?
Unlike conventional debt financing like a business loan, Invoice or A/R Factoring is when a business sells its open account for a lump sum of money. Rather than waiting 30-90-days for your accounts receivable (AR), you receive a cash advance of up to 93% of the total AR value. Invoice Factoring can be used for payroll funding, PO Financing, and other general business expenses.
At Bankers Factoring, our Invoice Factoring program improves client cash flow and unlocks their growth potential. We buy your open invoices, and you receive a cash advance the same day. Invoice Factoring helps businesses in a time crunch for funding.
Visit our previous article, “How Invoice Factoring Works,” to learn more.
Two Types of A/R Factoring
Receivable Factoring agreements have recourse and non-recourse terms stating who bears the credit risk.
In Full-Recourse or With Recourse Factoring, the seller of the account takes on the credit risk for non-payment of ARs.
Invoice Factoring without Recourse or Non-Recourse Factoring
In Non-Recourse Invoice Factoring or Without Recourse Factoring, Bankers Factoring, the factoring company, takes on the credit risk.
Credit risk is when your customer declares bankruptcy, insolvency, or protracted slow pay, instead of paying the invoice. If the customer, called the account debtor, fails to make payment, Bankers Factoring takes on the bad debt.
Non-Recourse Factoring is a form of AR Insurance that protects our client’s cash flow and business operations. Business Owners do not need to worry about bad debt and payments with Bankers. Our A/R Insurance protects entrepreneurs and Business Owners from financial disasters in today’s economy with recessionary fears.
Visit our previous article, “Understand Non-Recourse Invoice Factoring.”
How A/R Factoring Works
A/R Factoring is an easy business financing transaction that funds businesses within days of the application. To qualify for Invoice Factoring, the ARs being sold must be from a creditworthy customer. Invoice Factoring is an excellent solution for business owners in financially distressed situations with back taxes and recent bankruptcy. Complete a Funding Application or Contact Us today to learn more. By selling your open invoice today, your business can receive an immediate cash flow to pay your employees and bills.
The typical Business Financing through Receivable Factoring deal has two cash disbursements for the client. First, the cash advances up to 93% of the AR value, called Same Day AR Factoring Financing. Second, the rebate or discount disburses the remaining open balance, less our small factoring fee.
Four Steps of A/R Factoring
- Client invoices their customer, also called the account debtor.
- The client sells their open invoices to Bankers Factoring.
- Bankers Factoring cash advances up to 93% of the invoice value the same day as approval.
- Bankers Factoring rebates the remaining account balance, less our small factoring fee, once the invoices are paid.
Receivable Factoring Example
For example, your business provides a large commercial customer with $100,000 worth of services or goods. The agreed credit terms extend NET 30 terms to your customer. This is hard for small businesses to cover two months of expenses, lacking cash reserves.
By selling your invoices to Bankers Factoring, we agree to a cash advance of $90,000 of the AR on the same day as our approval. These funds are deposited directly into your business checking account for expenses such as payroll funding, overhead, equipment, and growth plans.
You can also read our article Invoice Funding through Factor Financing.
When your customer, the account debtor, pays Bankers Factoring, we will send you the remaining account balance, less our fees starting at .95% per 30 days.
A/R Factoring Example
|Invoiced amount value||$100,000|
|Initial advance (90%)||$90,000|
|Remaining balance invoice payout (10% factoring rebate) minus fees||$10,000|
|Fee (2%) per 30 days||$2,000|
|Total Funding Received||$98,000|
What are Factoring Fees?
Invoice Factoring fees cover the various expenses of the factoring company, such as the administrative and processing fees. Also, our AR Insurance and bad debt protection are included in our factoring fee. Our competitive rates start at .75% and range from 1% to 3%.
A Factoring Company charges a fee for each funding agreement which depends on the client’s overall credit risk. Credit risk is determined by the creditworthiness of the account debtor. The risk environment of the operating industry contributes to the profile and factoring due diligence process.
The main criteria for Invoice Factoring include the following:
- Your Customer’s (the Account Debtor) credit score and credit profile
- A true sale of goods or services
- Dollar Amount and Scope of the Funding Agreement
- Industry of the client
Learn more about our Startup Tiered Pricing that rewards businesses for growing their monthly receivables. Our Selective Invoice Factoring incentivizes our clients to factor a batch of their accounts, providing a more significant cash flow line.
Factoring fees overall are less costly than high-interest debt such as Merchant Cash Advances and other lines of credit.
Visit our previous article to learn more, “Factoring Rates Explained.”
The Bankers Factoring Advantage
Bankers Factoring provides A/R 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 invoice discounting.
Factoring invoices will give you the following:
- Same Day Factor Financing
- A/R Insurance provides bad debt protection
- We collect payments and are responsible for collecting
- Cash advances up to 93% on the same day as approval
- Tiered Pricing for Startups
- Cleaning Company Weekly Payroll Funding
- Unlimited Access to Working Capital
- Fees start at .95%
- Outsourced A/R Management
- 24/7 online Factoring Reports
What is Factoring Your Invoices? Receivable factoring gives you fast and safe working capital with Bad Debt Protection from Bankers Factoring, one of the best Invoice factoring companies. Turn outstanding invoices aged 30 to 90 days into ready working capital.