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 Sell Your Accounts Receivable
Factoring is the sale of accounts receivable (invoices) at a small discount---for immediate cash. A factor is a specialized type of finance company that provides working capital by purchasing B2B (business to business) receivables. For example, as a small factor, the price we would likely pay for a $1,000 invoice that pays off in 30 days is around $950. If it takes 60 days before payment is received, the price would be closer to $900.
Instead of waiting 30, 60, or more days for your customers to pay, you can sell some of those invoices to us for CASH! Since factoring is not a loan, no debt is created along with an obligation for a monthly payment of interest and the repayment of the principal. Why go further into debt--borrowing money long-term--for what is essentially a short-term cash flow problem? Need more cash? Sell more receivables. When your cash flow improves, sell less or none at all. Factoring can also be used as a supplement to conventional business financing.
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B2B or B2G
Factors are only interested in purchasing B2B or B2G (business to government) receivables. Invoices to private parties are not eligible. The invoices must be for products or services that have already been delivered. The invoices must be verifiable, undisputed, and to creditworthy customers that are very likely to pay within 60 days. Factors are only willing to purchase receivables that haven’t had a lien placed on them previously by another party. Factors have no interest in purchasing delinquent debt. Collecting bad debt is a job for a collection agency, not a factor.
Although we advance cash on a routine basis, factoring is not a loan. The money is simply the proceeds from the sale of one of your assets (an invoice), at a discounted price. You do not incur any debt when you factor your receivables.
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History of Factoring
Something on the order of $150 billion worth of receivables get factored annually in the United States, let alone the rest of the world. Although factoring dates back centuries, historically its use was confined to just a few industries (textiles primarily) and mostly to larger companies. Thanks to modern computers and the internet, factoring is now available to a wide variety of industries and even very small businesses.
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