Companies that engage in business-to-business sales and services, and offer 30-90-day terms to their customers, are best suited for invoice factoring services. Whether just starting out or preparing for a growth phase, our accounts receivable financing can help your business grow and succeed.
Eight ways our fast financing can benefit you:
1. Confidently accept large orders and watch your profits grow.
2. Improve the quality of your customers by taking on larger, slower-paying clients.
3. Reduce stress by eliminating the financial ups and downs of revenue/expense cycles.
4. Save money by taking advantage of any and all early-payer trade discounts while improving your relationship with vendors.
5. Get paid on your invoices right away.
6. Reduce bad-credit risk customers by taking advantage of our no-extra-cost credit research service.
7. Gain extra time in your day by using our extensive reports to more effectively manage you’re A/R.
8. Stop stressing about tax issues and let us work with the IRS on your behalf.
Most People Factor Everyday and Don’t Even Know It
Think about a credit card transaction for a moment.
You buy an item and swipe your card at the store to pay for it. You get your item right away, but aren’t out any immediate money. Instead, you promise to pay the credit card company for all or part of the bill within 30 days.
The retailer pays a fee on your credit card transaction, which is usually somewhere between two and four percent of the price. By paying that cost to the credit card company, the retailer gets the money it’s owed on your purchase right away while the credit card company waits the 30 days to receive payment from you.
Retailers accept the discount on its credit card purchases as a simple “cost of sales.”
With credit cards, the credit company gets paid on both ends of the deal: from the retailer fees and through annual fees and/or interest on the consumer side. This is an accepted financial arrangement used by millions of people and businesses.
The process of invoice factoring is quite similar.
Except factoring companies get paid on only one side of the transaction. When a business sells an item to another business (its debtor), a factor will pay the business right away while waiting up to 90 days to collect from the debtor. The credit extended to the debtor costs them nothing, while the rate charged to the business is often as little as 1 percent of the transaction cost (possibly even less, if Universal Funding is your factor).
The benefits of factoring far outweigh those measly costs. When you partner with Universal Funding, you get over 65 years of business finance experience along with rates as low as .55 percent. That’s a small price to pay for unlimited cash flow, tax help when needed and complete access to a professional accounts receivable management team.
How Business Should Work
Some business owners might think the process of factoring receivables is complicated.
The process is actually very easy: Factoring is simply the practice of selling accounts receivable to a third party. That’s it. Simple enough, right?
Let’s say you have chosen to partner with Universal Funding and have factored your first invoice. You receive most of the money you are owed on that invoice as soon as we receive it. Universal then waits for your customer to pay, and once he does, you receive the balance you are owed, less a small fee for our service.
Insufficient Working Capital Kills Businesses
One of the biggest killers of new businesses is insufficient working capital. That’s due to the simple fact that revenue rarely keeps up with expenses in the short term. Having cash available to deal with dips in business, unexpected expenses or slow payments from customers is hard even for established businesses. Large companies typically deal with the problem by keeping an open line of credit with one or more banks. For a relatively new business, factoring can be a particularly valuable solution to this problem because it provides cash flow without adding debt to your balance sheet.
Debt shouldn’t be used to gain operating cash flow, it should be reserved for expanding or improving the business or purchasing major equipment; investment that adds value to the company.
Factoring provides a means to bring in the daily operating cash that you need. It’s really nothing more than speeding up your cash flow, receiving almost immediately money that might otherwise take 30, 45, or 60 days (or longer!) to arrive. That enables you to pay operating expenses with your revenue, which is how your business should work.
Don’t Create More Debt
A benefit of factoring that’s often overlooked is the fact that it can save you from having to hire someone to handle your accounts receivable. If you haven’t needed to hire someone for this role, chances are you’ve been handling it yourself. Factoring your receivables could free up time for you to focus on building your business instead of dealing with the mundane but very important task of managing your A/R. If you’ve been doing it yourself chances are you have neglected the dozens of other duties that make up the day of a small business owner; tasks that could lead to more business.
Invoice factoring with Universal Funding can be a way to maintain a healthy cash flow without having to resort to debt.