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Invoice Factoring for Small Businesses

How Invoice Factoring Works for Small Businesses

July 8, 2019

A Step-by-Step Guide on How Invoice Factoring Works for Small BusinessesInvoice factoring - 101

It is important to learn how invoice factoring works for small businesses. Let’s use, for example, the relationship between a small business owner and its client. In this scenario, the small business owner’s name is Sarah. Sarah’s business sells affordable, trendy, handbags. Her number one client is Nina’s Boutique. Nina’s Boutique buys 50 of her handbags a month. At the end of every month, Sarah packages up her bags along with a $1,000 net 30-day invoice and ships it off to Nina’s Boutique.

As a small business owner, Sarah needs consistent cash flow to meet payroll, maintain daily operating expenses, and ultimately grow her business. Sarah notices she is a bit strapped for cash and could use some financial backing, so she goes to a bank to apply for a bank loan. Unfortunately, Sarah discovers that as a start-up company bank loans are difficult to get. The rates are very high, and she is required to earn a certain amount of money each month through her business. Furthermore, the approval process was very tedious and time-consuming. After feeling somewhat defeated, Sarah learns from another small business owner about invoice factoring.

Sarah calls up a factoring company and speaks to a factoring expert. The factoring expert takes a look at Sarah’s business and agrees to give her $900 in cash upfront in exchange for her invoices. The factoring company holds onto 10% of the invoice until Sarah’s client pays the invoice in full. Sarah eventually receives the remaining balance of the invoice minus a small factoring fee. Sarah says, “Sign me up!”

Moving forward, Sarah’s client, Nina’s Boutique, pays the factoring company for the full $1,000 invoice every month and Sarah gets paid $900 the same day without having to wait 30 days to get paid.  Invoice factoring frees up the cash Sarah needs to successfully run her business. How invoice factoring works for small businesses.

Value Added Factoring Services

Not only do invoice factoring companies supply businesses with immediate cash like in Sarah’s case, but some invoice factoring companies offer value-added services. These services offered, can free up time for the business owner to focus on growing their company.

Below is a list of some of the additional services that TCI Business Capital offers to help strengthen a client’s business.

Credit Analysis and Risk Assessment

A prospective customer presents new opportunities, but do they pay their bills? Knowing the credit history and payment trends of potential customers gives insight into the quality of the potential customer.

Treasury Services and Online Reporting

Funds are advanced to clients via ACH deposit, wire transactions, or even check. Online reporting of all transactions is a valuable line of communication.

AR Management

TCI Business Capital provides a dedicated AR specialist to give your customers friendly reminders about payment on an invoice.

Getting Started

If you own a start-up company like Sarah or are trying to grow and expand your business, contact TCI Business Capital today. Our easy to set-up factoring lines allow customers access to the working capital they need, quickly and easily. A factoring quote is done in 15 minutes and funding within 24 hours. We distinguish ourselves from others through our get-it-done culture, reliability, flexibility, and award-winning customer service.

To apply for a custom factoring program, give us a call at (800) 707-4845 or click here to contact us. In as little as 15 minutes, we’ll provide a free no-obligation consultation and quote for a custom factoring program to meet your business demands.