The process of invoice factoring is common for many businesses who are seeking ways to get additional cash flow and working capital without following the traditional process of obtaining a loan—a process that often requires a lot of paperwork and a lengthy review and approval period. If you have heard of factoring and want to know if it’s the right option for your company, here’s a quick overview to help you understand the process.
What is Factoring?
When you have outstanding invoices that you would like to turn into immediate cash and don’t have time to wait until your clients send payment, factoring allows you to sell these invoices to a third party. The factoring company purchases the invoices by providing you a large percentage of the value of the invoices up front. It benefits your company because it allows you to get cash right now rather than waiting until your customers pay within the terms you have arranged with them.
How Does it Work?
In general, a factoring company will purchase invoices and provide an advance between 70 to 90% of the original invoice value. We can provide quick decisions on whether or your invoices are purchasable, based on variables that include:
- Your customers’ creditworthiness
- Your clients’ ability to repay the debt on time
- Total invoice amount
Once approved, the factoring company then takes over the collections process, sending out notifications and statements. The remainder percentage of the invoice amount is then paid to your company, minus fees, upon collection.
How to Get Started
Getting started with factoring is simple. Just call Universal Funding today to talk to our experienced Business Development professionals about your business and find out if we can help. We work with established small and medium-size businesses with solid revenues. We work quickly to get you a quick decision on financing. Contact us today or fill out our online rate form for more information.