How Does Factoring Work?

If you’re a business owner, you’re likely familiar with a variety of funding options—loans, borrowing, investing, credit, and grants. All these have positives and negatives, depending on your company’s specific needs. Factoring is another excellent option for businesses of all sizes in a variety of industries. Many companies find the downsides are very few compared to other funding sources. But how does factoring work?

Factoring Is A Funding Option

As a business owner, you have so much riding on its financial success. Whatever funding process you choose, you want to understand every step completely. Educate yourself! To summarize it, factoring is selling invoices to a third-party buyer. This third-party buyer is known as a factoring company. The service is also known as invoice factoring or selling your accounts receivables. It is not a loan or a sale of your ownership. Factoring frees up your money so you can use it sooner. You can use it for new equipment, a marketing campaign, or to replenish stock. It’s your money—spend it however you need!

How Does Factoring Work?

Factoring can be a real option for businesses. Here is a step-by-step guide to how factoring works at United Capital Funding.

1. Start by reaching out to UC Funding by calling 877.894.8232 or contact us online. You’ll get a quick, free consultation: no long application forms, no collateral, no crazy terms.
2. Provide a copy of the invoice is provided to UC Funding.  Those in the staffing and service industries along with those who work under government contracts can especially benefit from factoring. Don’t let billing cycles or contract terms prevent you from getting your money.
3. United Capital Funding pays you 80-90% of the invoice in cash. Factoring happens in a matter of days—not weeks or months. Remember, this is YOUR money. Factoring helps you access it sooner.
4. United Capital Funding acts as your accounts receivables department and services the invoice. The invoice is no longer your responsibility. UC Funding will take care of getting it paid.
5. Your client pays 100% of the invoice to United Capital Funding at our secure lockbox facility.
6. Once your client pays United Capital Funding in full, we pay you the remaining 10-20% balance minus a small professional fee. That’s it!

Factoring Vs. Traditional Loans

Traditional bank loans focus on your company's balance sheet, profits, and cash flow. When selling your accounts receivable, factoring companies focus on your customer's creditworthiness. Additionally, factoring is not subject to credit cycles, economic volatility, or market fluctuations. The factoring approval process is much quicker and simpler than loan approvals. Clients can receive same-day funding, as opposed to waiting up to 90 days for payment. There’s also no interest—just a small fee taken out of your final payment.

Who Is United Capital Funding?

United Capital Funding is a factoring partner for businesses large and small. We work with a variety of industries. Mom-and-pops and Fortune 500s alike sell us their accounts receivables.  Meet our team, learn more about our culture, and ask us your questions. We look forward to partnering with you to see your business succeed.