Steps to Factoring Your Accounts Receivable
Why would a company factor receivables using invoice factoring?
Table of contents
- Steps to Factoring Your Accounts Receivable
- Why would a company factor receivables using invoice factoring?
- What is A/R factoring?
- How does accounts receivable factoring work?
- Benefits of A/R factoring include:
- What is the factoring of your accounts receivable?
- What are the two types of accounts receivable factoring?
- Why would a company factor its accounts receivable?
- Reasons you would sell or factor invoices:
- Is factoring receivables a good idea?
- What is the effect of factoring business accounts receivable?
- How much does it cost to factor receivables?
- Accounts Receivable Factoring, or A/R Funding at Bankers Factoring
What is A/R factoring?
Accounts Receivable (A/R) Factoring, invoice discounting, or A/R Funding, involves selling your open, unpaid invoices at a slight discount to one of the many factor finance companies. Bankers Factoring, a factoring company, purchases your invoices and assumes credit risk and collections effort on your invoices. Over 29% of businesses fail from a lack of funding – factoring receivables or receivable factoring is a financing option that provides the financing your business needs in times of growth, change and crises.
Please read what is A/R funding?
How does accounts receivable factoring work?
We advance you 80 to 93% of your invoice value within days of sending your online funding application. Your business receives fast funding that you receive on the same day of your account setup. Suppose you are struggling to secure financing because of bad credit or time in business. What do you do if turned down for a business loan? In that case, receivable factoring solves your working capital issue and allows you to safely offer credit terms to your customers. Finance factoring is a proven cost-effective finance solution for the not-yet-bankable entrepreneur. You receive fast cash advances against your accounts receivables with Bankers factoring service.
You can also read our guide to funding your business with accounts receivable financing.
Business owners can focus on growth, growth, and business development with the Best Receivable Factoring Company. Our non-recourse factoring program uplift your credit profile with bad debt protection versus other recourse factoring companies. Bankers Factoring company pays you the same day you invoice your customers, and nobody has a lower accounts receivable factoring cost. Turn your business’s unpaid invoices into safe working capital with the best invoice factoring company.
This is one of many reasons we are one of the best factoring companies and have won awards in both 2022 and 2023. Let us prove to you we are one of the best invoice factoring companies.
You can read our article on what is factoring receivables.
Benefits of A/R factoring include:
- Accessible working capital for startups, bank turndowns, and underserved businesses.
- Fast funding for your business within three to five days.
- High cash advance rate and factoring rates are cheaper than credit cards.
- Cheaper upfront than Credit Insurance.
- Eliminate long receivable cycles – creating more cash flows.
- Non-recourse factoring exclusive bad debt protection program.
- Flexible financing lines that grow with your business without cutting your equity and business capital.
What is the factoring of your accounts receivable?
Receivable factoring is a form of financing that means selling accounts receivable invoices at a small discount to face value. With this type of funding, your business sells invoices to Bankers Factoring (third party), who then pays you – breaking the wait for customer payment. The funds from these sales are often kept directly into your bank account within 24 hours or less. We are an award winning accounts receivable factoring company.
Related article: A Comprehensive Guide to Factoring Invoices
What are the two types of accounts receivable factoring?
There are two types of accounts receivable factoring: recourse and non-recourse factoring. Your style of factoring agreement has a significant impact on your risk exposure. In recourse factoring, your business is responsible for bad debt costs. If your customer fails to make payment, the factoring company can seek relief through your business assets.
Without recourse factoring is a better solution to reduce your bad debt risk. In non-recourse factoring, Bankers Factoring takes on the credit risk – giving you bad debt protection. You can enjoy your cash flow with no strings attached from a non recourse accounts receivable financing company like Bankers Factoring.
Related article: Understanding Non-Recourse Factoring
Why would a company factor its accounts receivable?
The business gets paid immediately at a slight rebate. The discount cost is called a factoring fee, starting at .9% to 1.6% per 30 days. Factoring can resolve cash flow issues if your business outlays capital to produce sales. Fast funding and immediate cash make selling invoices a practical funding solution.
Reasons you would sell or factor invoices:
- Insert much needed capital financing into your business operations.
- A trusted funding source for payroll financing.
- Working capital to grow your business through organic and acquisition growth.
- Acquire new customers and business loans turned down.
- Real Estate is illiquid, while your accounts receivables are liquid.
- You face a lack of cash flow from stretch customers’ credit payment terms.
- You are a startup that cannot receive bank funding or bank loans.
- Financially troubled business owners: bankruptcy, IRS back taxes, bad credit, no cash savings at any financial institution.
- Seasonal business cycles with sudden spikes and dips in sales.
- Your business has a long operating cycle with deep initial outlays.
Related article: Why Sell Your Accounts Receivable?
Is factoring receivables a good idea?
If you’re a small business owner, factoring invoices can be a financial life saver. If you have high credit card debt or too many pending invoices, factoring your receivables can help get your business back on its feet.
Many businesses are turning to receivable factoring as a basic part of their financial strategy. Only 48% of small businesses receive the funding they seek (Fundera). Factoring injects a trusted source of capital into your business, especially in times of short notice.
Receivable Factoring offers several benefits, such as:
- An instant cash booster when you need it most (i.e., during crises)
- A new source of funding for companies who may not qualify for loans from banks
- Your staff receives weekly payroll – payroll funding financing
- Non-recourse factoring provides bad debt protection with a low cut rate
Related article: The Pros and Cons of Factoring A/R
What is the effect of factoring business accounts receivable?
Factoring positively affects the cash flow of your business and your ability to pay bills on time. It also gives you the cash flow to prepare for economic crises and vulnerabilities. As you convert your A/R into cash, your business can operate at a higher level of sales growth.
Factoring can help you secure a loan or line of credit later as you step up your balance sheet. You will enjoy how accounts receivable factoring works at Bankers.
Factoring allows you to manage your business by:
- Managing your capital share
- Investing in assets
- Growing sales
- Increasing staff
- Enter new markets
- New product development
- Controlling cash flow more predictably
How much does it cost to factor receivables?
Factoring fees are tallied as a percentage of the invoice amount per 30 days. For example, you factor $100,000 invoices with a 1% factoring rate per 30 days. Bankers Factoring would receive $1,000 in factoring fees, and you would receive $99,000 in funding. And remember, since bank interest rates don’t include credit insurance or credit protection, it is not a direct comparison.
Your factoring rate and other crucial finance conditions are located in the factoring agreement. Factoring costs include discount rates and other admin processing, or transfer fees.
Related articles: What does Invoice factoring Cost, and How Much Do Factoring Companies Charge?
Accounts Receivable Factoring, or A/R Funding at Bankers Factoring
Bankers Factoring, the Best Non-recourse Factoring Company, assumes risk when buying your receivables. Our invoice funding process allows you to receive fast cash in exchange for your A/R invoices. We rely on the creditworthiness of your customers to provide you with the working capital you need.
- Get paid faster with a factoring rate that is not much more than a credit card interest rate.
- Stop tracking down payments and working on collections.
- Based on your customer’s credit history, not your credit score.
- Bankers Factoring company assumes the payment risk for invoice payments with free credit checks.
- No more wondering when your customers will pay when selling unpaid invoices.
- High advance rates and low factoring fees- understand your true invoice financing cost.
- Special programs for trucking companies.
- Minimal credit requirements.
- Have access to free cash flow and grow your business.
- A total A/R management solution.
Bankers Factoring’s accounts receivable factoring services are safe and fast. We are excited to welcome you to our family of well-funded businesses. You will like how small business A R factoring works for you with us, and the cost of factoring receivables with Bankers. With our fast application process, we are ready to be YOUR CHOICE in invoice financing companies for small business owners.
We want to be your award-winning accounts receivable factoring company and give you the benefits of non-recourse accounts receivable financing and help your cash flow issues go away.