What is Factoring?
Factoring is a process where you sell your unpaid invoices at a slight discount to get cash up front. By selling your invoices to a third-party, called a factor, you get the money you need immediately, regardless of when your client actually pays.
Factoring drastically reduces the traditional waiting time associated with invoicing. Since funding can be secured in 24-48 hours, you can have cash on hand quickly to invest in the company, buy inventory, or pay bills.
Invoice factoring provides a substantial and simple alternative to loans, which can impact your financial leverage and create new debt for your company. Not only does factoring keep your company from going into further debt, it is also easier for new companies than applying for a loan. Invoice factoring is also independent of your businesses' age and standing, since you're receiving money for goods or services already provided.
Factoring gives you the control over your cash flow, and your long term financial situation. It is also very flexible with regard to how often you use the service. You can factor one invoice, or entirely turn over your accounts receivable operations, freeing up your staff and your bank account to conduct business more efficiently.
Who Can Profit From Factoring?
Factoring provides the greatest benefits to companies that:
- are growth-oriented and intent on expansion,
- want to accommodate larger clients and larger orders,
- want to offer more favorable terms to their clients,
- have government or military customers,
- are receiving payments from insurance companies,
- experience seasonal growth and strains on capital, or
- are in any of the fields listed below
Corporate industries include:
- Air freight
- Accessories
- Apparel
- Audio or video taping
- Business machine repair
- Camping equipment
- Caterers
- Carpet manufacturers
- Chemicals
- Commercial cleaning companies
- Computer consultants
- Computers
- Construction materials
- Construction projects
- Cosmetics
- Decorating
- Defense contractors
- Dental and medical supplies
- Direct mail services
- Electrical contractors
- Electronics
- Fire equipment and service
- Furniture manufacturers
- Garden equipment firms
- Hazardous waste firms
- Independent truck driving
- Janitorial services
- Jewelry companies
- Lawn maintenance
- Maintenance
- Neon signs
- Packaging
- Paging or answering services
- Paint manufacturers
- Paper manufacturers
- Paving contractors
- Pest control
- Photographic equipment
- Plastics
- Printers
- Remediation and abatement
- Restaurant equipment
- Sign companies
- Staffing agencies
- Steel sporting equipment
- Telecommunications
- Temporary employment agencies
- Textiles
- Timber
- Tires
- Transportation
- Valves
- Website/Internet providers
Health-care product and service providers include:
- Office-based physicians
- Diagnostic facilities
- Independent laboratories
- Physical therapy providers
- Home health care providers
- Medical equipment companies
- Dialysis centers
- MRI facilities
- Psychology/substance-abuse centers
- Many other businesses that bill a third-party payor