Invoice factoring is a form of financing used to get working capital. Businesses will sell their open invoices to a factoring company who gives them immediate cash. Invoice factoring is fast, simple, and a debt-free way of getting financing for companies who cannot wait months, or weeks, for payments. Invoice factoring is very simple, and straightforward. Companies who use invoice factoring typically provide a product, or service, to their customers. When it’s time to invoice the customer, company will send the invoice to the factoring company – like Zogby. Our invoice factoring company will advance the company a % of the value of the invoice. The invoice is forwarded to the customer, who then pays the it on their normal terms. Once the invoice is paid to the company doing the invoice factoring – the remaining balance is paid to the company.
Invoice factoring can improve cash flow and there’s no interst
Invoice factoring isn’t a loan, and no interest is charged. Instead of paying interest, the cost of factoring, is based on how long it takes your customer to pay your invoice. Factoring fees are based on things like – dollar volume of invoices factored, credit, and payment history, of your customers and the expected payment terms.
What are the benefits of invoice factoring
Companies who use invoice factoring will see many benefits. First, factoring is based on a customer’s credit + payment history. Companies who aren’t eligible for traditional lending easily qualify for invoice factoring. Second, immediate access to money makes it possible for companies to meet their payroll needs, purchasing new materials, settle their payables, or other expenses. Bottom line – you get cash on hand.