Account Factoring

Tired of getting turned down for bank loans and lines of credit because your new business isn't established enough yet? Or maybe you don't have the collateral needed to secure a loan. Whatever your specific situation, it's not uncommon. That's why businesses and new companies are turning to alternative sources of financing. One of these financial solutions is called account factoring.

Account factoring in a nutshell

Account factoring is often simply referred to as factoring. It's a form of funding that businesses use, particularly when they can't secure funding through traditional means, such as a bank loan. Sometimes companies prefer to use account factoring because it is easier than having to go through the extensive paperwork that always accompanies bank loans or lines of credit.

With account factoring, you can get immediate cash in return for the sale of your account receivables. When your company ships product to customers, an invoice goes with that shipment indicating the amount of money owed for the product and the date that the payment should be received by. Often the due date for the invoice is in 30 or 60 days from the date of shipment, a time period that can be too long for companies that need quick cash to keep their business afloat or growing.

Account factoring companies like Factoring Associates have filled a void created by banks. Because banks rarely invest in new or non-established companies, finding adequate funding for your company can be exceedingly difficult. This is where account factoring comes in. Using your company's account receivables as collateral, you can get immediate cash for your company. An account factoring company will purchase your company's A/R for a small fee. They then pay you immediately for the invoices; often you can receive about 80% or 90% of the total. Then your customers will send their payments to the factoring company.

Factoring and credit
With account factoring, you sell your account receivables to a factoring company in exchange for cash. However, a factoring company will not assume every account you want to factor is a good investment. Perhaps you have some clients that have poor credit and are a risk to both you and the factoring company. You might not even know that some of your clients have poor credit until you hire a factoring company. In addition to providing you with funding for your business, an account factoring company will first conduct a credit check on the customers that you wish to factor. This may highlight some potential risks among your clients, a good thing to be aware of, particularly for companies first starting out.

Your company's credit will not be negatively affected if you decide to hire an account factoring company to collect payment on your unpaid receivables. In fact, your credit will probably improve because account factoring will supply your company with a cash flow that can be used to pay bills and take care of other business related expenses. Furthermore, an account factoring company does not base its assessment on your credit. Rather, you are using your customers' credit to secure financing for your company, so there is little risk to your company at all.

If you would like more information about our service, we recommend you call or contact us here. Alternatively, you may start the application process by applying here.

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