Getting Cash Fast – The Basics of Invoice Factoring
Cash flow is critical to any business. Without enough cash on hand, businesses are not able to conduct daily business. But what does a company do if its cash flow is limited by slow receivables? One option is to take advantage of invoice factoring. It is our specialty here at fastFACTR.
If you are new to the concept, you may be concerned about whether factoring invoices is right for your business. We cannot answer that question for you. However, we can give you the basics and let you decide for yourself. If you have any questions about invoice factoring or how our particular service works, don’t hesitate to contact us.
A Short-Term Loan Instrument
The starting point for invoice factoring is defining what it actually is. In the simplest possible terms, it is a form of short-term financing that utilizes unpaid invoices as collateral. The company receives cash by selling invoices to the factoring company. When those invoices are paid, the business repays what was borrowed, plus the factoring company’s lending fee.
A good way to look at the fee structure is to compare it to selling something on consignment. Auction houses use this model all the time. When you sell something on consignment, the auction house gets paid by charging you a fee based on a percentage of the total sale price.
Invoice factoring works the same way. The only difference is that you pay the factoring company its fee once your invoices are paid. That fee is still based on a percentage of the total, just like consignment fees.
Don’t Compromise Customer Relationships
We cannot speak for other factoring companies, but with fastFACTR, you maintain your relationships with your customers. We do not take over accounts receivables. We do not take on the task of collecting from your customers. Nothing changes in that relationship between you and them.
We feel this is important for several reasons. First, factoring companies are private financing companies. They are collection agencies. We want to fund your short-term financing needs, not become the collection arm of your business.
Second, it is in our best interests to make sure that nothing comes between you and your customers. By allowing you to oversee collection duties, we are not stepping in between you and your customer as an intermediary. Your customers will never know, nor do they need to know, that you have factored their invoices.
A Win for Both of Us
Invoice factoring is a fairly common short-term financing tool for small businesses. It also represents a win for both parties. When you factor with us, we both come out in a better position. Your company gains access to much-needed cash while we earn a reasonable profit via lending fees.
Your company needs to maintain its cash flow in order to remain viable. At times when cash flow is interrupted by slow paying customers, invoice factoring provides access to fast cash. That is what we are all about. We are in the business of helping small businesses keep things moving along with short-term funding based on accounts receivables.
If you are at all unsure about invoice factoring, please contact us with your questions. We understand that there may be some hesitancy among small business owners who have never considered this financing option before. We want to put your mind at ease before you make any decisions. That way, should you decide that invoice factoring is right for your company, we will be in the best position to help you.