General Questions about Factoring
1What is Factoring?
Factoring is the purchase of your accounts receivable (invoices) in order to provide you with the cash flow you need when you need it. Factoring is a widely accepted business practice used by large, mid-sized, and small companies that allows your company to turn your account receivables into immediate cash, improving your liquidity and cash flow. Factoring releases cash from invoices of sold products or services allowing businesses to increase their cash flow thus creating solutions for paying staff, buying inventory and covering overhead costs.
2What Kind of Companies Use Factoring?
Factoring can be used by almost any company which issues payment invoices instead of receiving immediate cash for the products which it sells. When companies want to expand their operations or keep a current level of production without having to sacrifice another area of the business, they need cash. However, cash is often tied down as accounts receivable (Invoices) and cannot be used immediately. Selling Invoices (factoring) provides a quick and easy way of receiving cash.
3Does My Company Qualify For Factoring?
If your company gives sales terms, is growing in sales/production, could use cash, or is a young company, it could qualify for factoring. Specific information is given on a per company basis. To find if your company can employ factoring, you must fill out a small Application Form.
4Does Factoring increase my Debt/Liabilities?
No. Factoring is a service which is accounted for as an operating expense instead of a debt. Engaging in Factoring will not hurt your credit history or increase your liabilities.
5How long does it take for me to get paid for my invoices?
Once your clients have been approved, cash disbursements will be made as Factorway receives your invoices.
6Will Factoring affect my relationship with my customers?
No, you will continue doing business with your customers as usual. The only thing that will change is that the checks for the invoices which Factorway has purchased will go to Factorway instead of to your company. We will notify your clients that you have hired Factorway as a financial servicing company and that checks should be made to Factorway instead of your company. Other than that, nothing will change and the relationship/image which your company maintains with your clients will be untouched.
7What is the difference between a traditional bank loan and factoring?
Traditional banks scrutinize extensively the applicant, (your business) for their ability to repay the loan. Not many small sized businesses will fair well through the application process which can be lengthy and cumbersome. At the end the business owner may end up with a denial of the loan or a reduction of the loan amount and still remain in a precarious financial situation. Factors rely heavily on the financial strength of your clients, (the debtors) allowing small sized businesses to be competitive without having to incur additional debt. Factors can assist start up businesses, businesses in rapid growth mode or those that are turning their finances around.
Get cash in 24-48 hours
Factoring-Invoice Discounting can provide you with the working capital needed to grow your business, improve your cash flow and pay your operating expenses. Account receivable factoring is the is the fastest way of obtaining funds to fuel your growth.