Invoice Factoring Basics Explained by daniellahaims


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									Invoice Factoring Basics Explained One of the biggest challenges in running a business is stretching the budget. Usually, merchants need to wait from 30 to 60 days for their customers to complete their payments. As a result, income and profit are frozen during this period, leaving the business without sufficient cash on hand. All sales that have been made are stuck as unpaid invoices or accounts receivables. When in need of financing, a business owner may try to find viable options. Accounts receivables factoring or invoice factoring is certainly a very viable option. The Basics of Invoice Factoring What is invoice factoring? Invoice Factoring makes it possible for a business to turn unpaid invoices into immediate cash at the time they need it. Thus, instead of waiting for 30 to 60 days for your customers to pay those invoices, you can already obtain the cash advance you need from your invoice factoring company. In turn, the factoring company would be the one to collect payments from your customers. In short, accounts receivables factoring is selling your unpaid invoices to an invoice factoring service provider so you can obtain the cash you need without waiting. Generally, 80% from the total amount of invoices you’ve submitted to your accounts receivables factoring company would be handed to you. This is also called the cash advance. The other 20% is called the rebate. You can receive your rebate or the remaining balance from the amount of your total invoices as soon as your invoice factoring company has received the full payment of the invoices from your customers. In case your customer fails to submit his payment on the given deadline, you will lose the remaining balance from your invoices as fee for the factoring company’s services. This is why business owners are advised to choose the invoices they would factor with care. It’s important to make sure that you’ll only submit invoices from your good paying customers to ensure that you will receive the amount of your invoices in full and that no percentage would be lost. Who are qualified to obtain factoring service? Both small and businesses can consider accounts receivables factoring. Most factoring companies require that a business be at least 2 years old in the industry to qualify. Unlike traditional bank loans invoice factoring financing is a lot less complicated and quick. As soon as your application has been approved, most factoring companies will send the cash advance you need in as little as 2-5 business days. See Resources

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