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6 Things You Need to Know about Invoice Factoring

by Irish Taylor Business Consultant
Let’s consider six things you need to remember when using invoice, or accounts receivable, factoring, to receive cash for your urgent business expenses.

1.Invoice factoring entails the submission of unpaid invoices to receive cash. In this financing option, you will sell your unpaid customer receipts and accounts receivables for cash, which you can eventually use for covering an immediate business purchase or for anticipating emergency expenses.

What’s good about invoice factoring is that you won’t need to wait for 30, 60 or 90 days to receive payment from your customers. After all, in as little as two to five days, the factoring agency can provide your enterprise with sufficient cash.

2.You can look forward to receiving as much as 80% of the total amount of invoices you’ll submit to a factoring company. On average, online factoring companies provide business owners with at most 80% of the cash tied-up with the unpaid receipts they have submitted. The remaining 20%, often called the rebate, will be given to you, as the business owner, as soon as the factoring agency receives full payment from your customers

In case of default, you will lose the remaining balance, since it will soon be retained by the factoring company as penalty fee.

3.The factoring company takes charge of the collection of the unpaid invoices. That’s because it now owns the unpaid receipts you have submitted. The transfer of ownership took place when the agency provided your enterprise with cash amounting to 60% to 80% of the total amount of your accounts receivables.

4.There are requirements your business should meet before it can qualify for this financial service. For instance, your enterprise must at least be two years old before it can be approved for factoring services.

In some cases, your enterprise should meet a quota set by the factoring agency, before you can submit invoices to it.

Lastly, there are agencies that require merchants to deliver high-quality goods in excellent working condition, before they submit their accounts receivables for factoring. This way, they can have the assurance that customers will indeed settle the bills they’ve incurred.

5.You can sign up for invoice factoring online. Simply use a reliable search engine, and, with just a few clicks of your mouse, you will eventually find companies that can provide you with cash, in a matter of two to five working days.

6.For this financial service to work to the advantage of your small business, you should:

- Be very careful when choosing which invoices to submit for factoring. Look for your most reliable customers and file their invoices for factoring. That way, you can avoid losing your rebate because of payment delinquency or default.

- Choose factoring companies wisely. Make sure that you will work only with firms that can provide your enterprise the greatest sum of cash for your accounts receivable. And don’t forget to run background checks on your target factoring agencies to know which firms are legitimate and credible and which are not.

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About Irish Taylor Innovator   Business Consultant

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Joined APSense since, March 26th, 2013, From Las Vegas, Nevada, United States.

Created on Dec 31st 1969 18:00. Viewed 0 times.

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