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How Does Invoice Factoring Work

Business owners are preparing for more activity as the economy reopens.  Deciding how finance their growth is always challenging.  As banks continue to focus on PPP loans business owners are looking for alternative lending. 

Invoice factoring, or accounts receivable financing, is a transaction where a business sells its outstanding invoices to a factoring company at a discount.  Companies that sell their goods or services to other businesses or government entities us factoring to access immediate cash flow.

Factoring is a quick and easy source of cash.  You’ll receive an advance of 85%-95% of your invoice upfront.  Once your customer pays the invoice, the remaining balance less a nominal fee is sent to the client.

There are 3 steps in invoice factoring.  First, you provide your product or service to your customer and send an invoice to your customer. Second, when you need to turn that invoice into cash you sell the invoice to your factor.  The factor will have already qualified your customers credit and wire you 85%-95% of the original invoice amount.  Third, your customers pays the invoice.  When the factor receives payment, they will charge their fee and forward to you the remaining balance.

Invoice factoring is a good solution for companies where slow cash flow is holding them back.  By selling their invoices for cash, business owners can take advantage of growth opportunities and stay current on payroll and operating expenses.

Call us today at 800-297-6652 or schedule an appointment to learn how accounts receivable factoring improves small business cash flow.  In the DFW area, call 972-404-4726. To find out how invoice factoring can help get your small business off the ground, call Jack Stieber or Brad Gurney  or  complete our quick application form.


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