Are you a small business that has just received a large order but can’t secure conventional funding? It can be a lengthy process to get a loan from a bank. Instead, you can consider selling your invoices to a factoring company. That is the way that many small businesses are securing funding for their ventures.
What is factoring?
It means that you can sell your invoices to someone who is willing to buy them. They will pay you a part of the money that your customer owes you. You will get the remaining – minus commission – when the credit is duly paid for by your customer. You will be asked for a report showing how long you have been owed the money.
I need the money immediately. How long will it take for me to get paid?
Factors will pay you based on how long the credit has been outstanding, how many invoices there are, and how credit-worthy your customers are. In a few days they will give you about 80% of the cost of the receivables. Then later you will be charged a commission between 2% and 6%.
I don’t want to enter into any illegal agreements. Don’t worry. Factoring is perfectly legitimate. It has been around for a very long time. The companies that offer these services take the risk because they recognize receivables as an asset and are efficient in collecting credit owed.
Will my customers be treated will? Don’t worry. Your customers will be treated well because not only does the factor want to be able to collect the payment due from them, but they also want to build a long-term relationship with you, so that you work with them in the future as well.
Can I use factoring more continuously?
Many businesses go into a long-term agreement, often more than a year or two – to hand over their invoices to the factors regularly. They want to avoid having to spend time and effort in collecting the credit, and are glad to hire someone who will do it for them. For businesses with individual customers, it becomes more manageable to do this collect on their own, but for companies, it is more feasible to hire a factor.
If you are now willing to look at factoring companies and their alternative business financing services, Dallas local listings will provide you with a list of such companies that work in your state. Select a factor based on their experience and the way you think they will handle your customers without damaging your goodwill, among other things. Then you can accept that large order and get your business back in the running.
