Business owners often face cash flow challenges, especially when they offer net-30 or net-60 payment terms to their customers. Waiting weeks or even months for invoices to be paid can create financial strain, making it difficult to cover payroll, purchase supplies, or take on new projects. This is where a factoring company comes in.
A factoring company provides a financial service known as invoice factoring. This service allows businesses to convert their unpaid invoices into immediate working capital. Instead of waiting for customers to pay, businesses sell their receivables to a factoring company, which advances a significant portion of the invoice amount upfront—typically 80% to 95%. Once the customer pays the invoice in full, the factoring company remits the remaining balance to the business, minus a small factoring fee.
How Does a Factoring Company Work?
The process of working with a factoring company is straightforward and fast, especially compared to traditional bank loans. Here’s a step-by-step breakdown:
- Submit Invoices – The business submits their open, creditworthy invoices to the factoring company.
- Receive Advance – The factoring company verifies the invoices and advances the majority of the invoice amount within 24 hours.
- Customer Pays – The customer pays the invoice directly to the factoring company.
- Receive Remaining Balance – After payment is collected, the factoring company releases the reserve amount, subtracting their fee.
This service is not a loan, so it doesn’t create debt on the business’s balance sheet. Instead, it leverages the business’s existing assets—its receivables—to generate quick cash.
Who Uses a Factoring Company?
A wide range of industries rely on factoring companies to maintain healthy cash flow. These include:
Small to medium-sized businesses, especially those that are growing rapidly or are newly established, often turn to a factoring company when they don’t qualify for traditional financing. Since the creditworthiness of the invoiced customer is more important than the credit history of the business, factoring is an accessible solution for many.
Benefits of Working with a Factoring Company
There are several key advantages to using a factoring company, including:
- Fast Access to Capital – Instead of waiting 30, 60, or 90 days, you get cash in as little as 24 hours.
- Improved Cash Flow – With steady cash flow, you can meet payroll, take on new contracts, and grow your business.
- No New Debt – Unlike loans, factoring doesn’t create additional liabilities on your balance sheet.
- Credit Risk Support – A reputable factoring company will assess your customers’ creditworthiness, helping you avoid risky accounts.
- Flexible Financing – The more you invoice, the more you can factor, making it a scalable funding solution.
Choosing the Right Factoring Company
Not all factoring companies are created equal. When choosing a partner, consider the following:
- Experience and Reputation – Look for a factoring company with a long track record and strong client reviews.
- Transparency – Avoid hidden fees or complex contracts. A trustworthy factoring company will be upfront about costs.
- Speed and Service – Choose a company that offers fast funding and responsive customer support.
- Industry Expertise – Some factoring companies specialize in certain industries, offering added value and insight.
Why American Receivable is the Right Factoring Company
At American Receivable, we’ve been helping businesses solve cash flow problems for over 45 years. As a top-rated factoring company, we understand the unique challenges that business owners face and provide tailored solutions that help them grow and succeed.
What sets American Receivable apart is our commitment to transparency, customer service, and speed. Our streamlined approval process means clients can start receiving funding within 24 hours. There are no hidden fees, and our rates are among the most competitive in the industry.
We work closely with businesses across a wide range of industries, including staffing, manufacturing, and professional services. Whether you’re a start-up trying to build momentum or an established company needing to bridge a cash flow gap, American Receivable is the factoring company you can count on.
Final Thoughts
A factoring company can be a lifeline for businesses struggling with delayed payments and cash flow uncertainty. By turning outstanding invoices into immediate working capital, businesses gain the flexibility and strength to pursue new opportunities and weather financial challenges.
If you’re looking for a trusted factoring company that puts your success first, contact American Receivable today. Let us help you unlock the cash tied up in your receivables and get back to growing your business.
Jack Stieber [email protected] 972-404-4726
Julie Adams [email protected] 800-297-6652
Brad Gurney [email protected] 972-404-4726
Dakota Stieber [email protected] 800-297-6652
