How do Invoice Factoring Companies Work?

Businesses need to have money available to operate and succeed. Invoice factoring companies are an excellent source of consistent cash flow for small and mid-size businesses. Factoring supplies the cash businesses use to meet payroll, manage expenses, and grow.

A factoring company is an alternative to traditional bank financing. Instead of getting a loan or line of credit, businesses sell their open invoices to a factoring company for immediate cash. This simple transaction provides money which is used as needed.

What is an Invoice Factoring Company?

An invoice factoring company is a business which purchases and advances money on the open accounts receivables of their clients. Businesses with customers that pay on extended terms, sell their invoices to a factoring company and receive an immediate cash advance.

The top factoring companies offer their customers additional services beyond the cash advances. The best factoring companies will provide their clients with services such as credit and risk assessment, accounts receivable management, and online reports. These additional services enable business owners to focus on the essential activities of their company.

Why Use Factoring Companies Services?

Many companies cannot afford to wait for payments from customers that pay on terms of net 30 days, net 60 days, or net 90 days. Factoring eliminates the worry and stress of these long payment terms by paying the client immediately on their invoices.

Factoring companies are a good alternative source of financing because they provide businesses cash quickly. Setting up an account with a factoring company can be done quickly and easily, enabling company owners to focus on running their business.

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How to Choose the Right Factoring Company

All invoice factoring companies supply cash to their clients. What separates one from another is the advances, factoring rates, contracts, and services each offer. When choosing a factoring company here are some considerations to keep in mind.

• Industry Experience: First of all, make sure the Factor has a record of serving other businesses in your industry.
• Advance Rate: Advance rates range from 80% to 90% depending on the industry and payment terms.
• Factoring Fees: This is the cost of factoring. Monthly volume, payment terms, and length of contract are used to determine factoring fees.
• Contract Length: Factors offer contracts for month-to-month funding or longer-term agreements. Select the type of deal that fits your long-term needs.
• Additional Services: Some Factors provide other services to clients including credit review of potential customers, AR management, online reporting, and more.

Why Choose TCI Business Capital

Since 1994 TCI Business Capital has served companies in the United States with factoring programs customized to fit the specific needs of each client.  We are rated one of the best factoring companies in the United States, because we provide funding to businesses in 24 hours or less, along with superior customer service. Our factoring lines range from $50,000 to $10MM, giving businesses flexibility and room for growth. For a free, no-obligation consultation and factoring quote, complete the form below, or call (800) 707-4845.