Factor financing is a way to finance business activity via invoices. Do you have a business that’s either in the beginning stages or already making sales and revenue? Need extra money to achieve a new goal? In this post I will tell you how you can take your invoices and turn them into cash.
Invoice factoring to acquire cash is a simple process. What happens is that your invoices are taken by a company that offers factor financing, and you are given cash to either expand your business with more equipment, payroll, expenses, more capital or anything else that you may need.
This makes for a great alternative to a business line of credit or business loan. There are many companies out there that offer this type of business financing with low interest rates. They have different ways that you can apply either online or by going to their office.
When you decide on a company to handle your factor financing, you usually get up to 80% of your invoices. Then when your customer pays the factoring company you will then get the other 20% minus the company’s fee. When using this process, the company in which you are going through already knows that you are good for the money because the goods or services have already been sold, so they have you send a copy of the invoice to your customer as well as to them.
A lot of businesses go this route to make sure they have constant cash flow. Factoring against your invoices are a great way to go so that you don’t have to wait the net 30, 60, even 90 days to get paid. It gives your business the money you need to continue the flow of business without the wait. Cash against invoices is kind of like when a person gets a cash advance against their paycheck except with financial factoring, they are getting most of the money up front but the company they go through takes their cut out of the final 20%.
Another nice thing about the factoring companies that business owners go through is the fact that they take the headaches out of getting their money. They give the owner the money and then the customer pays them.
Whether starting your own business or needing the cash flow to keep a business running, a business owner will find that getting cash from their invoices is a proven way to go. It’s a win win situation with the factoring company helping the business owner out with the cash they need right away, without having to wait until they are paid in full by the customer.