What is Invoice Factoring?
Invoice factoring offers businesses the opportunity to sell their open account receivables to a factoring company. In return, the factoring company gives an immediate, lump sum to the company that sold their receivables. Growing companies often experience growing pains. Invoice factoring is a solution to help your business secure fast funding to pay for operating expenses, inventory, or unexpected bills.
The benefits of Invoice Factoring For Furniture Stores
Invoice factoring is an alternative finance service that is available to companies of all sizes. This service provides business owners with access to immediate cash they need to meet their business obligations, whatever they may be.
Invoice factoring is not to get confused with a conventional business loan. A loan creates debt. Invoice factoring is not a debt. Instead, it is an ‘advance’ taken on future credit card receipts. Factoring uses companies credit card volume and recent sales history to determine how much they can advance. Bad credit is OK with no collateral requirements. For these reasons, invoice factoring is a workable solution for gearing up for growth and meeting financial responsibilities.
How Furniture Invoice Factoring works
Other terms that Invoice factoring are known as include “accounts receivable financing” or ‘receivable factoring.’ Working with a factoring company is straightforward. The process for begins with agreeing with a factoring company. Your business continues to operate as usual. The only difference is that all invoices get remitted to the factoring company instead of the customer. Within 24 hours, the factoring company deposits an advance on the invoice into the company bank account. When the customer pays their invoice, the factoring company collects a fee.
The Invoice Factoring process:
1. Do your business and continue billing clients.
2. Remit the invoice to a receivable factoring company.
3. The invoice factoring company advances a payment on invoices.
4. Client invoices get paid to the factoring company.
5. Factoring company takes fees. The remaining balance gets paid to the company.
How do loans and lines of credit differ from Invoice Factoring?
Over the years more kinds of financial products have gotten made available to business owners. Invoice factoring is one of these services. Cash advances provided by accounts receivable factoring companies are not a loan or a line of credit. Instead, they are an advance on your business’s future sales receipts. Banks and traditional lenders rely on factors including credit scores and collateral, which can disqualify company owners with dinged up credit from getting approved. Further, the application process for traditional loans takes longer to process. (Keep in mind that loans and lines of credit add debt to your company financials, as well.)
When working with an invoice factoring, company owners with bad credit, but a steady history of sales can get an answer for their factoring request quickly. Depending on the company you’re working with, the advance could get approved in 15-minutes. Invoice factoring advances are available in amounts up to $20M, based on the business financials. With generous advance amounts, get access to capital to grow your business.
What is the Invoice Factoring agreement?
A factoring agreement is a contract between the company getting the advance and the factoring company that funds the request. The factoring agreement contains all terms of the agreement, including term/length of the contract, a volume commitment, the rate of the advance, and other fees associated with factoring advance.
The term, or length, of individual contracts, can vary based on the program selected. Some invoice factoring contracts only last three to six months. Others are valid for multiple years. To make sure that invoice factoring is right for your company, always be sure to read all of the terms and conditions before signing the agreement.
Invoice factoring requires business owners to make a ‘volume commitment’ as part of the advance agreement. By doing so, companies can get the lowest rates, and higher advances so they can optimize their cash flow.
How much money can I get from a Furniture invoice factoring company?
Invoice factoring companies can advance company owners anywhere from 70% and up of the invoices collected. Factors that determine how much of an advance your business qualifies for include recent trends in your payments, sales volume, and the payment history of your clients.
What are Factoring Fees?
Factoring fees get set using variables including sales volume, the average amount of invoice totals, sales trends, as well as the business industry. Depending on the factoring company, this could be a flat-fee charge. Alternatively, other providers use a factoring fee in addition to an administrative fee. For specifics of the factoring fees, refer to the proposal or contract.
Researching Furniture Invoice Factoring companies
Many factoring companies serve North America. When selecting the best invoice factoring service for your company, the ideal factoring company should help you meet the capital requirements you request. The terms and the conditions should be favorable to helping you achieve your goals.
Invoice factoring works with all types of businesses and industries. When researching, you’ll find two kinds of factoring companies. Those who specialize and those who work do business with multiple sectors. A factoring generalist works with companies in a wide range of sectors. A specialist factoring company works in one industry.
Recourse and Nonrecourse Furniture Factoring Companies
Factoring companies can be either a recourse or non-recourse factoring company. Knowing the difference between the two is critical when choosing which factoring company is right for your company.
Recourse factoring is common among factoring companies. When working with a factoring company that uses recourse factoring, the factoring company reserves the right to sell the invoice back to you if the payment gets defaulted.
Non-recourse factoring usually isn’t common in the accounts receivable financing industry. If a factoring company offers fully non-recourse advances, the factoring company assumes all credit risks associated with the advance. Non-recourse factoring, if available, has a higher fee structure than a non-recourse advance.