Factoring Accounts Receivable: A Definition For Businesses

Business owners may not be aware of all the options they have for providing short-term funding for their business. While there are options such as bank loans and lines of credit, these are often not available to small businesses.

By turning to a very old and well-established funding option, factoring of accounts receivables, small companies, startups and even those businesses with a few bumps on their credit can find the cash they need to effectively manage their finances.

To get started, getting a clear definition of factoring accounts receivables can be very helpful. We will provide a quick overview of the process and how it benefits a business.

The Definition

Defining “factoring accounts receivables” will be slightly different depending on who the factor is. At United Capital Funding, we pay 80% or more of the face value of the invoices you choose to sell.

We also take over all collections for those accounts, which eliminates the need for your back office to handle this task. Once your customer pays the invoice, we deduct our pre-set fee from the 20% held and forward the balance to your account.

It is important to realize that with factoring accounts receivables, there is no use of the word financing, loan, repayment or interest – as these terms do not apply to factoring.

Once your business has the funding, which can be in just days, there are no restrictions on how you choose to use it. You can make payroll, buy equipment or supplies, take on new jobs or even hire new employees; it is all up to you.

To talk to one of our industry experts in factoring, give us a call today at 877.894.8232.