Business-to-business (B2B) sales can leave a firm with plenty of invoices that might not be paid for 30, 60 or 90 days. The problem is that the firm holding the invoices will still need to pay staff, suppliers and landlords in the meantime. An invoice factoring company can help fill this money payment time gap with an “available line of credit.” Alternative lenders recognize that many businesses have higher credit ratings, making their invoices more valuable than consumer debt. An invoice finance specialist will determine the value of each invoice and will buy the right to collect on that invoice by agreeing to pay you the invoice’s face value less a discount (typically 2-6 percent). This creative finance method is especially popular in the fashion industry where seasonal clothing lines must be changed quickly. End your dependence on payment cycles by turning to Thrive Kick’s factoring funding solutions. Apply today and work with the Thrive Kick to negotiate the best invoice financing program for your company.
What is Invoice Factoring?
How does invoice factoring work? Productive businesses will exchange products and services for an invoice promising payment by the purchasing (debtor) business. This invoice has value. An invoice finance specialist will be able to place a price tag on each of your invoices. Invoice factoring companies will provide a dollar amount based on the value of your invoices. Your firm can pay its bills from this additional influx of capital. This debtor invoice system works better when you sell to multiple businesses with high credit ratings. There are many types of invoice funding companies ranging from small independent firms to large bank subsidiaries. Developing a relationship with a solid invoice factoring company will help you raise cash more quickly and easily.
Invoice Factoring Rates: Do the Benefits Loans Outweigh the Costs?
While all of the terms and conditions are clearly laid out in factoring agreements, some businesses still have a difficult time adjusting. Some firms are used to depending upon invoice payment for revenue as opposed to a factor line of credit. Selective finance providers will seek to make a profit by purchasing your most valuable “qualifying” invoices at a discount. Ensure that the qualification requirements are clearly explained. What is the recourse if a business debtor defaults? Typical factoring quotes are based on interest rates, percentage funding and the creditworthiness of the business owing you money. Some finance providers will request more direct involvement in your capital control and will even issue their own new invoices to your business customers. Large financial institutions can afford to wait 90 days to be paid; your small business might not have that same luxury.
Online Invoice Finance Services That Make Factoring Invoices Easy
Invoice financing companies will offer different solutions, including online and mobile. Mobile factoring allows you to send digital invoices and review your account using your smart phone. Online invoice factoring rates may change daily as the invoice value is constantly being recalibrated based on its age. Since invoice lending values a single invoice based on that business creditworthiness, your capital access is based on the credit ratings of your business customers. Invoice funding firms can easily look up these corporate credit scores for you and make your life much easier in that sense. Getting invoice “loans” can create a new business relationship with alternative capital sources, setting you up for a easier financing down the road.
Invoice Factoring Companies That Offer Funding for Small Business
Invoice financing is an option when your bank will not extend your line of credit. While small- and mid-sized businesses will have a bank loan to cover a certain portion of their expenditures, they might not be able to handle unexpected expenses or emergencies. Businesses such as seasonal fashion companies tend prefer invoice finance due to the nature of their revenue streams. The invoice “loan” is also being used more often during leveraged buyouts (LBOs), however many companies will have a difficult time getting financed in these types of transactions.
Getting an Invoice Advance from Finance Brokers
The absolute beauty of factoring invoices is that companies needing immediate capital exchange future promises for “cash-in-hand.” This ultimate form of easy finance can shift risk management from a small business to a financial lender. What is the negative side of factoring? Businesses will need to change their mindset recognizing that their invoices are now owned by another party. These factoring providers can adjust values over time based on the age of your invoices.
Factoring Invoices from Multiple Lenders
Each factoring service will offer its own unique features. With the vulnerability of capital markets, you might want to develop a relationship with multiple lenders to diversify your capital sources. To apply for invoice funding, fill out the form to the right and a representative will contact you to discuss your options.
