Factoring companies accounts receivable is factoring invoices receivable by commercial finance company that purchase invoices for cash. Fees vary from factoring companies to factoring companies and from client to client. They are determined by a combination of your customer base creditworthiness, average payment cycle, invoice size and factoring volume.
Factoring companies accounts receivable provides over 100 billion dollars to industry each year. In fact, it is an old financial service used by multi-billion dollar corporations that is now available to smaller sized businesses to which banks are reluctant to lend funds. Factoring companies are filling the tremendous void that banks have created.
Factoring companies accounts receivable is when a company sells its accounts receivable (invoices), representing money due from its customers to factoring companies, at a discount from face value so that it does not have to wait the normal 30-45 days for its accounts receivable to be paid. In short, these factoring companies accounts receivable helps a company speed up its cash flow, thereby enabling it to more readily pay its current obligations and grow.
Many new and growing companies have trouble obtaining traditional bank financing due to their length of time in business, profitability or financial strength. Factoring companies accounts receivable allows these companies to convert their accounts receivable into instant cash. Once you have delivered your product or service and generated an approved invoice, you can get your money in as little as 24 hrs. Factoring companies accounts receivable can help a company stay current with its vendors and other financial obligations such as payroll and taxes.
Other types of financing generally require two years in business and showing a profit. With factoring companies accounts receivable you do not have this limitation. Young, growing companies or those with tax liens and even bankruptcy can still qualify for accounts receivable purchasing lines.
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