Many small and medium sized businesses may not be familiar with the term ‘factoring’. Big business has been using this little known financial instrument for decades, but only recently have some financial institutions begun to offer Invoice Factoring to small and medium businesses.
Basically, a financial entity like Universal Funding Corporation funds your accounts receivable for a pre-determined rate. This is not a loan, and no debt is entered on your company’s balance sheet. The credit of your customers is the primary concern of the factoring company.
Factoring solutions, including receivables factoring is a fairly new phenomena in small and medium sized businesses. They are just not used to the idea of AR funding. This type of system allows your cash flow to be much more fluid; instead of waiting 30 – 90 days for invoices to be paid, with accounts receivable factoring you get your money up front.
The rates are determined through a diverse set of variables; this will depend on volume of sales, the invoiced customer’s credit history and payment schedule with you. There are other factors involved with account factoring as well, but term rates are generally low. Factoring also allows companies to take advantage of early-pay discounts often offsetting the cost of factoring in full while still allowing for a company to increase sales and grow.
For custom factoring solutions, factoring help and understanding how this tool can work to grow your company through accounts receivable funding, please go to our get rate page.