Commercial Factoring

Commercial factoring is a relatively simple process in which a company, called a factor in this process, buys your receivables and invoices at a discount (usually about 10% off the total invoice) and then gives your business advance payment up front.  This prevents your business from waiting 30, 60, or 90 days for payment after a sale.  You don’t have to be your customer’s “bank” which can at times greatly improve your business’ cash flow.

Of course, when you are using commercial factoring it’s important that your customers regularly pay their invoices on time. It’s a bad situation for all parties involved if the receivables can’t be collected.

Here are some more facts and advantages about factoring that can potentially help your business:

You get your money quickly after delivery and invoicing. Let the factor worry about collecting while you get on with your business. Get the working capital you need .

Learn about the credit worthiness of your customers. Before you extend longer credit terms to a customer or take a bigger order from a customer wouldn’t it be nice to know more about their credit worthiness? When a factor does a credit analysis on one of your clients you are entitled to get a look at that analysis.

You are not borrowing money or taking out a loan of any kind. The cash advance a factor gives you is based on the credit worthiness of your client or customer not on your own. In many cases businesses will qualify for factoring even if they don’t have a long track record. Often businesses will qualify even after a chapter 11 bankruptcy filing.

You can increase your sales by being able to extend credit to more customers. Many furniture stores do this for example.