New Jersey Invoice factoring
New Jersey Invoice factoring can be an ideal alternative to bank loans or other forms of financing options available to a company. Instead of waiting weeks or months to obtain the funding that they need, businesses can complete a factoring advance deal in about 24 hours. Let’s take a look at what factoring advances are and why your company could benefit from them.
A New Jersey Factoring Company Purchases Your Accounts Receivable
A factoring advance involves an outside company purchasing your accounts receivable. You will receive up to 90 percent of the invoice’s value from the company that provides your business with the advance. Instead of making a payment directly to your company after receiving an invoice, a client or customer will pay the factoring company. The customer will usually get the same payment terms with the advance provider as it does when making payments directly to you.
This Is Not a Loan
Invoice factoring is simply an advance of future sales that you are likely to make. Therefore, you are essentially borrowing your own future income as opposed to taking anyone else’s money to meet the company’s financial needs. As your organization is not taking a loan, it will not represent additional debt nor will there be a need to go through a credit check.
Furthermore, there is generally a lot less paperwork or other hassles when you work with an invoice factoring provider. Typically, all the invoice factoring provider needs to know is the credit score of your clients as well as how long your company has been in existence.
Get More Money From an Advance
Perhaps the best reason to seek an advance as opposed to a loan is that your business may be able to get more from an advance. In some cases, it may be possible to borrow up to $20 million in a matter of hours. However, the amount of your company’s advance will be determined mostly by the volume of accounts receivable that it produces as well as the amount of those accounts.
Specialized Vs. Generalized Advance Companies
While there are factoring companies that offer advances to organizations in a variety of industries, most choose to specialize. This means that they will offer funds to a company in a specific sector such as trucking or hospitality services. Working with a specialized advance provider may be ideal because that partner will have the knowledge needed to provide terms that best meet your needs.
What Kind of Recourse Does a New Jersey Invoice Factoring Provider Have?
An invoice factoring advance company can offer both recourse and non-recourse advances. Typically, your business will take advances from a recourse provider because it means taking on less risk in the event that your clients don’t pay in a timely manner.
If an advance is non-recourse in nature, it could come at a higher factoring rate, and there may be additional fees charged by the company providing the advance. If recourse is available to the factoring company, it will have the opportunity to sell the invoices back to you.
You’ll Generally Get Advances for Multiple Accounts Receivable
It is rare that you will be able to sell one invoice or a small number of them to an invoice factoring company. Instead, you will enter into an agreement that sees invoices sold to a factoring organization for many months or years into the future. It may also be necessary to commit to providing a minimum volume of invoices to be factored.
Therefore, you should consider how much funding your business needs and for how long before entering into such an agreement. Furthermore, it is important to consider how much the factoring company will take as a service fee as this will necessarily reduce your future income.
Be Sure to Read the Contract Carefully
Prior to receiving your first advance, you will be provided with an invoice factoring contract. It spells out the terms of the advance and what rights and obligations each side has to each other. It is important that you read these terms carefully to ensure that you don’t do anything to violate the agreement. It may be possible to have an attorney review them before signing the deal. The factoring company itself may also be able to help you read and understand any arrangement that you enter into.