Invoice factoring isn’t a new concept, but it’s been gaining considerable traction among many businesses in recent years. As a business owner, you might find traditional financial institutions, such as banks, less responsive and less convenient in these times. Not only will you face a lot of paperwork and high interest rates, but these bureaucratic organizations have tightened their belts, making it hard for businesses to receive financing in a timely manner. If your credit history or collateral do not meet the bank’s criteria, your request for a loan can be rejected right away.
A factoring company solves the problem of finding quick cash for your business. Factoring your accounts receivable is one of the most affordable ways to unlock money that is currently tied up on your debtors’ books.
Most customers want to pay your invoices in 30, 60 or even 90 days. The problem is that many businesses can’t afford to wait that long for payment. You may need the money sooner so that you can cover your own expenses. Your factoring company can buy your invoices and pay you upfront on those accounts. The transaction works as follows:
Business A is a small business working with many clients, including a large corporation we’ll call Client X. Business A and Client X have a great working relationship and Client X has excellent credit. Client X pays their invoices in 60 days, but Business A needs the money sooner. This is when Business A decides to factor their invoices.
- Business A sends their invoice for what Client X owes them to the factoring company.
- The factoring company sends Business A an advance for that invoice and handles the collections process on that invoice. (In this case, the advance is 85% of the gross invoice value, but this percentage can vary based on a number of variables.)
- Within 60 days, Client X pays the invoice in full to the factoring company.
- The factoring company settles the transaction by paying the remainder of the invoice (15%), minus a small factoring fee, to Business A.
Factoring invoices is a risk-free, hassle-free way to get the money that is due to you on time, every time.
Interstate Capital has successfully funded over 10,000 growing companies since 1993 and it purchases nearly $1 billion of invoices annually from companies located throughout North America. Our factoring programs include a long list of unique features including:
- Rates starting at just 0.49% per invoice
- Advance rates up to 100%
- Same-day funding
- 24/7 automatic credit approvals
- Fuel advances (for motor carriers)
- Professional collections and much more
Do you think that factoring might be a good solution for your business? Then get an instant factoring rate quote today.