You have several options available when you need to access cash for your business. However, each option comes with a set of charges, fees or rates that must be considered. You may have explored accounts receivable financing as a solution to your need for capital, but have not moved forward due to uncertainty about the transaction. Financing your invoices is actually a straightforward process that does not involve long-term loan payments, excessive fees or interest charges. The transaction is simply a sale of your open invoices at a discount. The finance company determines the proper invoice factoring rates for your business and offers you cash for your receivables.
How Are Factoring Rates Determined?
When you explore accounts receivables financing, you will offer your open invoices for sale to a finance company like Universal Funding. The company will consider several variables in order to determine the total payment you will receive for your invoices. Some of the factors the finance company will examine to determine your rates include:
- Your company’s sales volume
- The credit strength of the customers associated with the invoices you are selling
- Trends in your customer payment cycles
- The total amounts of the invoices you are selling
- The current climate of your industry
- All invoices or select accounts
Once your receivables financing rate has been approved, the finance company will propose an advance rate which will determine how much of your invoices will be funded up front. Typically the advance rate will vary between 70-95% depending on your portfolio. Once an invoice is paid in full by your customer, the factor will return the remaining balance less the factoring rates.
Factoring is not a debt. Once the payment is received, the remaining balance is part of your company’s working capital, and your transaction with the finance company is complete.
Find Out More About Factoring Rates
Universal Funding can offer your company cash for open invoices. Simply fill out our online rate form to request a free consultation. We can explain our process for determining rates for invoice factoring and discuss the possibility of accounts receivable financing as a funding solution for your business.