When your business is experiencing low cash flow, you may find that a conventional bank loan is not the right solution to cover your immediate operating expenses. Property owners, employees and suppliers all need to receive regular payments whether or not the company’s current income can cover those payments. Accounts receivable factoring allows you to access cash within days, in time to cover immediate operating expenses. You may be familiar with the fees and interest charges associated with bank loans, but factoring is structured differently. Here is a look at how factoring rates are determined and how much cash you can expect to receive from an accounts receivable finance company.
Factoring is a method of accessing capital through the sale of your company’s assets. In accounts receivable financing, that asset is your open invoices. Your business allows an accounts receivable finance company, like Universal Funding, to purchase your open invoices. The amount of cash you receive is determined by the advance rate and by the factoring rate you agree upon.
These are the most common areas that are used to determine factoring rates:
- The current sales volume of your business: Your overall sales volume helps determine the appropriate rate for the amount of business your company does.
- A measurement of your industry’s climate: Rates are partially determined by the current success of businesses like yours.
- Your customer payments: The finance company will look at trends in the payments your customers make on invoices like the ones you are selling.
- The credit of your customers: Approval is determined more by the credit strength of your customers than by your credit since your customers will repay the invoice.
Learn More About Rates
Universal Funding carefully considers these key areas of your business in order to offer you the lowest possible rates. You can learn more about our factor rate method by completing our rate form or call us today at 1-855-236-4936 to talk about rates and how we can help you cover your immediate operating costs.