Factoring is a type of financing that is different than any other kind of loan. Technically, factoring is not a loan at all. Instead, it’s the purchase of accounts receivables (products or services) for immediate cash. A typical business using this type of financing would be a start-up company or a business with a sharp business incline. Factoring gives businesses the power to continue growth without weakening equity or incurring debt. Funding for this type of financing can be received as quickly as 24-hours after invoices are submitted and verified.
Factoring can be used to:
- Bypass the traditional loan process
- Get capital quickly
- Avoid the headaches of collecting aging debt
- Level out cash flow
- Borrow money that is secured by your debt
Factoring can be beneficial for any business but is particularly attractive to start-ups and small- to medium-sized businesses because of the quick turnaround and flexibility.
Benefits of factoring:
- Great for businesses with short credit history
- Allows for a variety of first-time funding amounts, from $5,000 to $500,000
- Funds advance can be as high as 95% of the sold invoices
- Supports 24/7 account management
- Same day funding available at no additional cost
How Does Factoring Work?
- The lender establishes a credit limit on the customers based on information that is submitted by the client.
- Business transaction is completed as usual; good or services are provided to the customer.
- A copy of the customer’s invoice is sent directly to the lender.
- The lender validates the merchandise or service was performed.
- The client receives the cash from the lender based on the amount of the customer’s invoice.
- Invoices are paid by the customer; all of the customers’ payments are used to repay the original loan amount.
Reach out to us at Active Business Loans to learn how the painless process of factoring may work for your business financing needs.