— Factoring Overview —

Factoring is a straightforward, legal and accessible method of obtaining the ready cash you need to pay whatever is needed to keep your business running successfully. A significant problem for many enterprises is ensuring that there is sufficient cash flow within the company to meet on-going costs such as salaries, or the costs of materials and equipment. The way in which invoicing is conducted puts many companies at a disadvantage, as they may have thousands of dollars outstanding from clients and yet unable to meet their day-to-day financial obligations. In these circumstances, factoring, or “accounts receivable financing” can be the perfect solution.

Factoring involves selling your unpaid invoices to a third party organization, which then pays you a significant percentage of the invoice value. The third party keeps the remainder of the invoice’s value to cover their collection costs and an administrative fee (factoring fee). Factoring is usually a quick, straight-forward process, with funds being transferred into the client’s bank account in a few days. Companies can choose which invoices they wish to sell to the factoring business; some organizations opt to sell all the invoices relating to a particular customer, others choose to sell all their invoices in a single transaction.

— How Factoring Works? —

 

  • Factoring Process

    In the first instance, the customer needs to decide on which invoices to sell to the factoring company. To solve immediate cash flow issues, a business will sell its account receivables to a factoring firm. Once the invoices have been sent to the accounts receivable financing company, the accounts receivable financing company transfers the relevant money to you, keeping a percentage that is their fee.

    Factoring is particularly useful in situations where the business is expanding rapidly or a major client for whom a considerable amount of work has been undertaken has payment terms of 30, 60, or 90 days. A typical example might relate to a manufacturer who has an order to produce a significant volume of a particular product for a major client. In the medium term they will be paid for the goods, but in the short term they need cash to pay the additional staff needed for production, finance raw materials and meet other expenses. Account receivable financing works wonderfully well in these and similar circumstances.

  • The Details

    Advance Amount
    Approx. 50-90% of the total invoice amount

    Repayment
    When your customer pays the invoice, you receive the remaining amount, less a small professional fee

    Professional Fee
    Can be as low as 0.20%

    Turnaround
    Funding in a week or less!

Factoring in 5 Simple Steps

  • step1

    You sell B2B good or services to a client.

  • Step2

    Sell your B2B invoice(s) to us at a small discount.

  • Step3

    Receive immediate working capital.

  • Step4

    We collect your B2B invoice(s) efficiently.

  • Step5

    You receive the balance due less a small professional fee.

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— Frequently Asked Questions —

How Are Factoring Costs Calculated?

Usually the fees for accounts receivable financing are obtained in two different ways: In the first instance, the factoring company will take a set percentage of the total invoice value as their fee. In addition, they will also take a further small percentage from the total outstanding value for every day or week that the invoice remains outstanding.

What Type Of Businesses Can Take Advantage Of Factoring?

Factoring is common across all sectors, including the hospitality industry, manufacturing, retail, construction, transportation and many more. Suppliers, logistics companies, primary industry and many more can all benefit from factoring. Money can be spent on anything from staffing costs, fuel, equipment or other on-going expenses which need to be met.

How is Factoring Used Successfully in Businesses?

The essential pre-requisite for successful factoring is that you have clients with unpaid invoices. Generally B2B operations that have appropriate accounts and invoices will be able to take advantage of factoring. To make the most of accounts receivable financing, generally companies need to be in a sound financial state.

Why Factor?

For a large number of businesses, factoring represents a good opportunity to get the cash they need for successful operation without needing to take out a loan or borrow from other sources. The process is extremely rapid, with many companies enjoying a cash transfer to their bank accounts within a day of selling their invoices; particularly when staff needs to be paid or immediate expenses must be met, factoring provides the perfect speedy solution.

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— Key Benefits of Factoring —

  • Funds can be transferred into your bank account in as little as twenty-four hours.

    Unlike a conventional loan, there is no maximum limit to the amount of cash you can raise through factoring; as long as you have outstanding invoices to cover the relevant amount, you can sell them to a factoring company.

    There’s no need to undertake a complex application process prior to accessing your funds.

  • Even if your company isn’t worth much, you can still leverage in considerable funding if you have significant levels of outstanding invoices.

    The credit rating of your business isn’t taken into account when determining which invoices can be sold; a factoring company will only look at the credit records and payment history of your clients.

    Factored funds aren’t recorded on your accounts as debts.

— Satisfied Customers —

“Again, thanks. I know you say it’s your job and it’s what your company does, but, it can’t be said enough. You and UCF are great. I know sometimes I panic and wait till the last minute, and yet you calmly get it done.”

Author's imageDistribution Company, FloridaCEO

“It was obvious that your firm had experience in handling problems that I was facing. I know that you were short handed due to the holidays, but your people still found a way to accommodate me by expediting the funding in a few days. I really do appreciate this.”

Author's imageTennessee Service CompanyOwner

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