Factoring is an age-old practice that helps to keep cash-flow within a business consistent and reliable. In short, factoring is a financial service that provides businesses the opportunity to raise working capital and increase their cash flow without incurring debt. Companies sell their invoices (accounts receivable) to the factoring company at a discount and, in turn, the factoring company collects on the invoices.
Considering the fact that many business owners spend a large portion of their time chasing payments from clients, factoring can save them plenty of time and make it possible for them to collect the payment that is due to them pretty much immediately. This also means reduced stress for the business owner as he or she will be able to pay his/her expenses on time and without concern.
What Is Factoring Receivables?
Factoring receivables is the act of selling the accounts receivable for working capital purposes. The business owner will receive an advance from the factoring company. Once the invoice has been paid in full and collected by the factoring company, the company then pays the business owner the remaining 20% (less a fee).
Factoring has been used by businesses since ancient times, but it has become more popular recently as more and more businesses look for ways to bridge the gap between the time a company issues an invoice to a customer, and the time that the customer takes to pay that invoice. Factoring is an alternative to traditional bank loans and high-interest merchant cash advances.
There are hundreds of factoring companies in the USA. Luckily, when looking for one that you can count on, Factoring Company Guide is here to help. Whether you need a factoring company in Virginia or Utah, Illinois or Texas, we have got the information right you need.