Factoring companies provide financing to small and mid-size businesses, in need of steady cash flow. With so many to choose from, picking the right Factor is a challenge. When evaluating factoring services, it’s essential to understand the process of factoring and why it’s the financing choice of so many companies.
Invoice factoring is the process of selling open invoices to a factoring company in exchange for an immediate cash advance. The Factor takes ownership of the client’s invoices and receives payment from their customer. Once payment is received, the remaining invoice balance is remitted to the client, less a small factoring fee.
Businesses use factoring when they have an immediate need for cash. When providing work or services on net 15, net 30, or longer terms, waiting on customer payments interferes with meeting payroll, managing expenses, or pursuing new opportunities.
Factoring companies are an excellent source of financing for businesses needing fast funding. Setting up an account is not as time-consuming or complicated as a bank loan. Plus factoring does not add debt to a company’s balance sheet.
Applying for and receiving approval on a bank loan application takes a long time. Factoring companies do not have as strict qualifications as banks. Where banks will base their decision on the credit history and financial ability of the potential client, approvals for factoring are based on the credit and payment history of the client’s customers.
Factoring companies serve clients with limited credit histories or those that have struggled financially. Start-up businesses, companies turned down by banks, and those with limited bank lines of credit use factoring to build financially stable organizations.
Factors all provide cash to the clients. What separates one from another are the advances, rates, contracts, and services each offer. When choosing a factoring company here are some considerations to keep in mind.
Since 1994 TCI Business Capital has served companies with factoring programs customized to fit the specific needs of each client. Our factoring lines range from $50,000 to $20MM, giving businesses flexibility and room for growth. For a free, no-obligation consultation and factoring approval, complete the form below, or call 800-707-4845.