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Small Business Factoring: How Does It Work?

How Does Small Business Factoring Work?

Picture this: You’re a business owner who has always managed to stay on top of your game. You run a successful company with a product or service that customers love, and business is good. You pay employees on time, order supplies quickly, and take care of bills. But what happens when you send several large invoices out, and customers don’t pay right away? Business was good because cash flow was there. But now you have an accounts receivable management cash crunch. This is where small business factoring can be a financial lifesaver for companies like yours.

Small Business Factoring

Think of small business factoring as a financial transaction alternative to, or in some cases in addition to, getting a standard loan from a bank. With small business factoring, a business sells its accounts receivable (customer and vendor invoices) to a factoring company, which then provides cash the business needs in as little as 24 hours.

Businesses that use factoring like it because:

• They don’t have to wait 30 or 60 days for customers to pay
• Factoring frees up time to manage their business
• It creates positive cash flow without selling off ownership or creating debt

Small Business Factoring Turns Unpaid Accounts Receivable into the Cash You Need Now

Many of the largest and most stable corporations in America and Europe utilize factoring as a means to speed up their cash flow so they can seize opportunities to increase their market share. So it stands to reason that small businesses, especially those who are less than five years old and rely heavily on fast turnarounds on invoicing, would benefit even more from working intimately with a reputable small business factoring and accounts receivable management company like American Receivable.

  1. Here’s how small business factoring works:
  2. A customer places an order with your business
  3. You provide the goods or services to the customer
  4. You invoice your customer
  5. You provide your accounts receivable to American Receivable and receive funds within 24 hours (less a small reserve)
  6. American Receivable collects payment from your customer
  7. Once payment is received, American Receivable releases the reserve to you

What Is a Typical Small Business Factoring Rate and Advance Rate?

The advance rate is the amount of money provided immediately to the small business that is factoring its accounts receivable, and it is expressed as a percentage of the total invoice amount. Advance rates usually range from 75% to 95%. Factoring rates can start as low as .8 percent. American Receivable doesn’t have application fees, up-front fees, or hidden costs. There are also no monthly minimums, maximums, or long-term commitments. Our small business factoring clients determine their needs.

Click here to learn more about factoring terminology.

Contact the Small Business Factoring Pros at American Receivable Today

Since 1979, American Receivable has provided small businesses with the financial resources and accounts receivable management strategies they need to grow, increase inventory, make payroll on time, and effectively compete in the marketplace. With offices in Dallas and Austin, American Receivable is ranked No. 1 nationally among factoring companies. Simply put, we are your source for factoring and accounts receivable management.

At American Receivable, our clients are our priority. We pride ourselves on our exceptional customer service and dedicated and tenured account managers. The success of our clients is the success of American Receivable. We can provide funding within as little as 24 hours in some cases. Call us for a FREE quote today at 1-800-297-6652, or complete the quick quote form below.