What Is Accounts Receivable Factoring?

Accounts receivable factoring, also known as accounts receivable financing, is a form of business finance where a company sells their open invoices to a factoring company in exchange for an immediate cash advance. It’s a common form of financing businesses use to improve cash flow and eliminate the wait for payments from customers.

Companies use this type of financing because it is a fast, simple, and debt-free financing solution for businesses that cannot wait for payments from their customers.

Scale Funding is a top choice among receivable factoring companies. We offer month-to-month financing programs ranging from $50,000 to $7 million a month. With the cash accounts, receivable financing provides, companies can meet payroll, manage expenses, and grow the business.

How Does It Work?

The process for accounts receivable factoring is quick and easy. Here’s how it works:

1. 1. Perform your work or service as normal.
   2. Send your invoices to your factoring company.
   3. The factoring company initiates a same-day advance on a percentage of your invoice total, directly into your bank account.
   4. The factoring company sends your invoice to your customer and follows up to make sure payment is received.
   5. When your customer pays us on their terms, the remaining balance of the invoice is paid to you, minus a small fee.

Get a Factoring Quote in 15 Minutes

What Are the Benefits?

• Customized Financing to Fit Your Company Needs
• Fast Quote and Application Process
• Immediate Cash Advances
• Financing that Grows as Your Company Grows
• No Additional Debt is Created

How Does It Grow Your Business?

With the available cash provided by accounts receivable factoring, businesses can take advantage of new opportunities for growth. Adding equipment or staff, opening new markets, or introducing new products are all much easier with cash in hand.  Consider the following table below to see how accounts receivable factoring can lead to growth and profits.

		Sales		Sales with Factoring	% Increase		Sales with Factoring	% Increase
Sales		$100,000		$200,000	100%		$300,000	200%
Cost of Sales		($75,000)		($150,000)	100%		($225,000)	200%
Gross Margin*		$25,000		$50,000	100%		$70,000	180%
Fixed Costs		($15,000)		($17,000)	13%		($17,000)	13%
Cost of Factoring		$0		($3,000)			($4,500)
Net Income		$10,000		$30,000	200%		$48,500	385%
*Opportunities to negotiate early pay discounts and ask for quantity discounts

The Cost of Factoring for Your Business

As mentioned above, accounts receivable factoring is a useful source of financing for businesses that may not qualify for a business loan or business line of credit. You might wonder how much would it be to factor your receivables for your business. Even though factoring does not acquirer any debt, like any form of financing, there are invoice factoring fees. To learn what the cost of what factoring for your company may be, try out our accounts receivable factoring calculator.

Factoring Calculator

Why Do Companies Use Accounts Receivable Factoring?

Accounts receivable financing is an ideal choice of financing for many companies. Those in a start-up or growth phase are often ineligible for traditional bank financing. However, these companies easily qualify for factoring.

There are also situations where factoring receivables is a better choice than bank financing. Because top factoring companies like Scale Funding have experience in a number of industries, companies can gain insight and information on industry best practices and current trends.

Why Accounts Receivable Factoring With Scale Funding?

Since 1994, companies across North America have selected Scale Funding for their accounts receivable factoring needs. At Scale Funding, we provide our clients with superior service and support.  Our portfolio of services includes:

• Quick Quotes: We can give your company a quote for factoring in as little as 15 minutes.
• Fast Funding: Once your account is set up and active, we provide same-day funding.
• Online Reporting: Real-time access to account activity and reports.
• Competitive Rates: Factoring rates customized to fit your business needs.
• Growth Opportunities: Factoring lines ranging from $50K to $20MM.
• Customer Service: You’ll receive dedicated relationship managers and funding teams, with knowledge and experience.
• Industry Expertise: We factor companies working in a variety of industries.
• Accounts Receivable Management: Our accounts receivable management services include integration with billing software, image archiving and payment postings.
• Credit Analysis & Risk Management: We make credit and payment information available so clients make the right choice when working with new customers.
• Accounts Receivables Management: A dedicated AR department helps ensure that payment is made in a timely manner.

For more information on accounts receivable factoring with Scale Funding, call us at 800-707-4845, or contact us via the web.