Invoice factoring companies can provide immediate, short-term funds for companies that are unable to obtain a traditional bank loan. Financing from traditional banks generally requires commercial borrowers to have two years in business and showing a profit. Banks tend to favor loans secured by tangible assets like machinery, inventory, equipment and real estate.
Working with factoring companies, in contrast, are less restrictive. When you sell your invoices – often called factoring – you dont incur any debt so there are no monthly payments. Plus, you can control your cash flow by determining how much to factor and when. Young, growing companies or those with tax liens – and even bankruptcy – can still qualify for an invoice factoring account. This makes factoring companies a viable source of funding for many businesses.
How It Works
In simple terms, heres how invoice factoring works: Factoring companies purchase your accounts receivable or freight bills at a discounted rate and issue you a lump sum payment. Essentially, your company sells its accounts receivable or invoices at a lower value for quick cash, instead of waiting the...