How Factoring Works

Factoring provides financing to small and mid-size companies in need of steady cash flow. Picking the right factoring company is a challenge, especially with so many options. When evaluating factoring companies and their services, it’s essential to understand the process of factoring.

Why Use Factoring Companies Services?

Businesses use factoring when they have an immediate need for cash. When providing work or services on 15, 30, 90-day 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 positive cash flow. Setting up a factoring account can be done quickly and easily. Plus factoring does not add debt to a company’s balance sheet.

Factoring Lines From $50K – $20 MM

How Factoring Differs From a Bank Loan

Bank loans and lines of credit are the lifelines businesses use to grow and prosper. However, the approval process can take a long time, and there are strict qualifications to meet. Banks base their decision on the applicant’s credit history and financial background, whereas factoring lines are reliant on the credit and payment history of the client’s customers.

Factoring companies serve clients with limited credit histories and those with low credit scores. Start-up businesses, companies turned down by banks, and firms with limited financial resources use factoring to build financially stable organizations.

Another differentiator is, unlike bank loans and lines of credit, companies receive cash the same day from the factoring company on their invoices. This is accomplished by the factor approving, purchasing, and advancing on the invoices immediately. Once payment is received, the remaining invoice balance is remitted to the client, less a small factoring fee.

How to Choose a Factoring Company

Factors all provide cash to the 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: 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 USA providing funding to businesses in 24 hours or less. 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.