Frequently Asked Questions About Invoice Factoring
How is invoice factoring different than a bank loan?
Invoice factoring provides immediate cash based on outstanding invoices, whereas a bank loan involves borrowing a specific amount with interest. Invoice factoring is often easier to qualify for than a bank loan and provides a more flexible and scalable funding option based on the business’s sales.
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How are invoice factoring rates determined?
We take into consideration many variables, some of which include your sales volume, your customers’ credit strength, trends in customer payment cycles, invoice amounts, and the current climate of your industry. For more detailed information on our factoring rates, visit our factoring rate information page.
How long does it take to receive the first funding?
The approval process can happen in as quickly as 2 business days after receipt of your application and your approval of our proposal. Funding usually occurs within a 24-48 hours of setting up your account and once invoices are received. The process of invoice factoring is pretty simple and takes much less time from approval to funding than a business loan.
Will my customers know that I have factored their invoices?
Although factoring has become quite common and many customers have probably sent payment to factors before, we are virtually transparent. We understand that customers are the most valuable key to business. We intend for you to maintain your customer relationships, so the way we communicate with them is respectfully designed to protect your goodwill.
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How does invoice factoring work?
- First, you send your invoice directly to your customer, just as you do now.
- You also send a copy of that invoice to us.
- Then, a letter introducing us to your customers is sent on your letterhead.
- As your new Accounts Receivable management company, we confirm the invoice with your customer on your behalf.
- Your customer will be asked to send a check to a remittance address, which is our bank lock box.
How can I be certain that your company will treat my customers well?
The last thing we want is for you to lose a customer. We are not a collection agency, so we will never harass your customers. Maintaining your customer relationships is of utmost importance to us. We only succeed if you succeed.
What if my customer doesn’t pay their invoice?
If an invoice is unpaid beyond 90 days, you have a few options. You can choose to swap out that invoice in exchange for a new one or you can simply buy it back.
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What if a lender already has rights to my accounts receivable as collateral?
We have many years of experience working with other financial institutions. Since we must hold the rights to the asset we are purchasing, we are usually able to arrange a subordination agreement or negotiate the release of any liens that may be encumbering your receivables.
I’m a new business with little or no credit history. Can I still qualify?
Unlike traditional bank loans, invoice factoring is primarily based on the creditworthiness of the business’s customers rather than the business’s credit history. As long as the customers have a strong credit profile, businesses with less-than-perfect credit can still qualify for invoice factoring.
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Can I qualify if I have tax issues?
In most cases, yes. It depends upon the tax lien amount in relation to your monthly volume and the details of the workout agreement you have with the government agency.
Have More Questions?
Call to speak to a factoring specialist (800) 405-6035.