The Pros and Cons of Selling Invoices

In today’s economic climate, it can be a struggle to acquire the necessary working capital to bolster a healthy cash flow or to take advantage of new business opportunities. Traditional methods of acquiring capital including bank loans and lines of credit can be insufficient or simply not available. A company in this situation has an excellent alternate solution: consider selling the company invoices to a factoring company.

pros-and-cons

How Does Selling Invoices Benefit My Company?

As traditional financing methods become harder to attain, the popularity of invoice factoring increases. Regardless, factoring is not a new tool. It has existed as long as the custom of extending net terms. In this arrangement, a funding source known as “the factor” assumes the risk of outstanding accounts receivable and provides an advance of funds available immediately to the client company.

Healthy invoices, that is, accounts that are current hold the most value and have the greatest weight at determining the lowest rate. Nevertheless, accounts that are 30 or 60 days old are still good candidates for factoring. Invoices older than 90 days are generally considered too much of a risk and enter the territory of a likely bad debt, but we will look at who your customers are to assess if there is a risk or if you have reasonable terms set-up with them. A company with a recurring set of invoices with reliable customers paying,  is an excellent candidate for factoring.

What Are The Concerns of Factoring?

Some companies are wary of factoring because they lose control of some of the collection process.  After you send out an invoice for goods or services sold, Universal Funding will send bi-monthly statements and will work protect your relationship with your customers. We know that if you don’t get paid, we don’t get paid, so it is in our best interest to maintain a respectful relationship with your customers.

Some factoring companies may not accept certain invoices because of the lack of credit worthiness of the customer, this does not take the decision out of the hands of the client who is still free to deal with high-risk customers outside of the factoring process.

Another concern is that factor providers are not necessarily collection agencies. Some factoring companies do not assume the responsibility to collect for bad debts. However, with a credit-healthy customer base, a company can avoid having to deal with this situation. Universal Funding will provide screening for any new clients to make you aware of any potential risks of taking on a new client.

How Do I Find Out More?

Whether you eventually work with us or not, we at Universal Funding Corporation are ready to help you understand how selling invoices can help your company. Please feel free to contact us by filling out our rate form today.

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