subject: Invoice Factoring For Dummies [print this page] You can't afford to wait 30 to 60 days to get paid by your clients? If you are like most business owners, waiting to be paid can be very challenging. In some cases it can mean lost opportunities. It can mean that you don't bid for big sales because you know you won't be able to play the waiting game. That's the best case scenario, now here's the worst case. You may have to delay, or worse, forfeit payroll for your employees. You may default on your rent payment and business taxes. And worst of all, it could spell the untimely end of your company.
Your first instinct as a business owner would probably be to call your friendly neighborhood banker and ask for help. Banks, however, exercise trepidation when dealing with certain companies - they don't normally give out loans to new firms, firms without hard assets or companies without three years worth of business statements showing a profit. At this juncture, probably you might be thinking of throwing in the towel because you're all out of ideas. But there ARE options.
If your company sells products or services to large credit worthy companies, you could qualify for invoice factoring financing. No longer do you have to wait a month or two - with invoice factoring, the turnaround time for getting your money is 24 hours. How quickly could you grow your business if your invoices were paid in 24 hours?
The beauty part about factoring is that it does not involve any hard form of collateral. The only requirement is that you have invoices form credit worthy clients. Also, factoring companies do not work like your typical bank. Unlike other financial institutions, a factoring company would provide financing tailor-fit to the invoices you provide. So if you can provide more invoices, you get more financing.
Factoring is very simple
You generate invoices for your products or services
You submit the invoices to your clients and to the factoring company
The factoring company advances you up to 85% of the gross value of your invoices (the remaining is kept as a reserve to offset disputes)
Finally, you get that 15% back from the factoring company once your client is able to pay up - and get charged a fee for their services.
Factoring financing is easy to qualify for and can virtually eliminate the 30 to 60 days it takes for your customers to pay. You don't have to play the waiting game when it comes to satisfying your employees and accepting new opportunities.
