Are you on the fence about factoring? Perhaps you need to build up your company’s cash flow, but you are concerned about committing to an agreement with a factoring provider?
Below are six quick facts that might ease your mind about factoring as a financial tool. To learn more about how factoring works, you can also read our free resource, Your Complete Guide to Factoring.
1.) Setting up an account is quick and painless.
It can take weeks and sometimes months to apply for and secure a traditional credit line. You can open an account with most factoring providers (also known as “factors”) in less than a week. Also, the amount of required paperwork to start factoring is less cumbersome than with many other forms of financing.
2.) Your customers’ credit histories are more important than your own.
Even if your personal and company credit scores are not the strongest, that is not the greatest concern when factoring. A factor is going to focus more on your customers’ credit histories and financial health. Since the factor will be buying your invoices and handling collections, your customers’ ability to pay on time is more crucial to the factoring agreement.
3.) The funding grows as your company grows.
With most factors, there is no limit to the amount of funding you can receive as long as you remain a client. It is common for factoring companies to fund receivables totaling in the millions of dollars per month. Unlike a line of credit, there is no cap to factoring. There is also no debt.
4.) Factoring is faster and more flexible than Quick Pay.
If you operate a trucking company, you might use Quick Pay to receive cash on your invoices earlier. Quick Pay usually takes two to three days, whereas many factors can fund your invoices in 24 hours or less. Factoring is also more flexible. Not all freight brokers offer Quick Pay funding. However, there is no limit to the amount of receivables you can fund with a factoring provider.
5.) You will see a difference in your cash flow.
The main benefit of factoring for your company is the quick injection of cash flow. Instead of waiting 30 to 60 days on customer payments, you can receive advances of up to 97% on your invoice values within a day. Under this arrangement, the cash quickly builds up, allowing you to address operating costs and even expand your business.
6.) You do not have to factor all of your receivables.
Factoring does not have to be an all-or-nothing proposition. As a factoring client, you may choose to fund some receivables and not others. This measured approach can help your company and accounting team become more familiar with factoring. If the ease of factoring turns out to be a good fit for your company, you can choose to add more receivables in the future.
For more than 20 years, RTS Financial has provided factoring solutions to companies in a wide range of industries. To learn more about factoring and the impact it can have on your business, call us today at (877) 929-4029.