When high-growth firms experience cash flow problems, their ability to expand can stall dead in its tracks. Traditional forms of bolstering cash flow come with their own set of problems, including:
- Short term loans increase debt-to-equity ratio, lowering the attractiveness of the firm.
- Long-term loans often come with the involvement of the lender in company operations.
- Unsecured loans based on growth potential often have a low approval rate.
For companies with these concerns, invoice factoring can be the perfect solution. factoring companies can fill the gap for Net 30, Net 60, or Net 90 payment structures.
The Invoice Factoring Process
Invoice factoring begins with customer invoices. Because the rate of the transaction depends on the quality of the customer, the first step in the process is a qualification of the customer credit health by the factoring company. Our Account Executives will contact the customer via emailto verify the state of the invoice. Once verified the invoicing company typically receives 80-90% of the invoice amount immediately.
The factoring company protects its interest by holding 10-20% of the invoice balance in a reserve account. In the meantime, our team does the work of collecting the invoice directly from the client according to the original terms. When this payment occurs at some time in the future, the factoring company pays the balance off the invoice amount less the processing fees. Many companies take advantage of this service on a continual basis, essentially moving the payment window forward weeks or months, depending on the net terms. This can continue for the period of the company expansion for as long as required.
How to Get Started
Interested companies can learn more about the process by contacting us with our online rate form. Universal Funding Corporation has significant experience in helping growth companies reach their goals through invoice factoring. If you like, we are happy to take the time to determine if our services match your needs.