Invoice factoring is the process in which businesses sell their invoices to a third-party company called factors at a discounted rate to fund efficient cash flow. It can be provided by banks or also by individual finance providers. But there are certain things that you should know before opting for the process of invoice factoring.
Duration for Invoice Factoring Contracts
The invoice factoring contracts are a certain time-based which usually lasts for 30-day, 60-day, and 90-day terms of payments.
The Worthiness of the Applicant Company
A key factor that would be checked while invoice factoring is if the company is eligible and worthy enough to get approved for the factoring systems. They will be checked and categorized on the basis of B2B or B2G.
Average Monthly Income
The factoring agency will be mostly inquiring about the average monthly revenue earned by the company requiring invoice factoring. Different agencies have different requirements. Usually, it ranges from $10,000-$30,000 every month. Many financing firms may also ask for revenue collection on a yearly basis that ranges from $50,000-$100,1000 every year.
Unlike big businesses, startups can generate millions of dollars in just a few months if they work efficiently and reach their customers properly. It is a key factor noticed by the financial firms before factoring.
Invoice Factoring Vs Bank Loans
Though bank loans have an affordable rate of interest, they ask for a lot. Hence, many businesses are unable to meet the requirements. In this case, invoice factoring comes handy as it does not ask for much and easily lend after just considering a few basic parameters.
Quick and Safe
This is one of the quickest ways to receive and get a steady cash flow. It is also a very safe method as all the steps are duly documented and highly confidential.
Cost for Invoice Factoring
The overall cost for invoice factoring depends on various factors related to the business such as the size of the business, overall revenue, expenditure, the level of risk among others. There are various fees, such as factoring fees, service charges, and other additional fees. Overall, factoring is affordable in the sense that it provides easy and efficient service to big and small businesses as well as startups.
Accord financial invoice factoring is affordable and efficient for businesses who want to get financed through a safe and quick manner.