If your business wants working capital to pay bills, fund growth, or negotiate discounts then it’s time to consider the top 10 benefits of factoring invoices.
All business owners experience the ebb and flow of cash flow but with banks tightening the extension of credit many options are dwindling. Fortunately, accounts receivable funding is going strong after decades of continued growth. Invoice factoring options are now more flexible and cost less than ever before.
Factoring companies will fund an immediate cash payment on the invoice amount, collect payment from your customer, and release the reserve balance less the factoring fee to you (for more details and an example see How Invoice Factoring Works).
Rather than a loan, factoring is the purchase of outstanding invoices at a discount. It is this distinction between selling invoices and obtaining credit that plays a key role in the many benefits unique to factoring. Here’s a look at the…
Top 10 Benefits Of Factoring Invoices
1. Fast Access to Cash/Factor’s Assumption of Credit Risk
The factoring process is quick and easy with funds provided within 24-48 hours on approved invoices. The initial setup averages 5-10 days from receipt of the factoring application and supporting documentation. That’s lightening fast compared to the weeks and months it takes most banks to decide on business loans! Moreover, when Capitol National Factors purchases accounts on a nonrecourse basis, it assumes the credit risk thereon, that a purchased account cannot timely be collected when due solely because of the financial inability to pay of the account debtor obligated thereon.
2. Cash Flow Without Debt/Off-balance sheet financing
Since old-line nonrecourse factoring is not a loan it doesn’t add to the liabilities on your balance sheet. That means no monthly loan payments and a clean balance sheet!
3. Flexible Terms / Variety of Factoring Services / Non-factoring services
Capitol National Factors offers a variety of factoring programs. For example, we can purchase accounts on either a nonrecourse basis, a partial nonrecourse basis (where our assumption of credit risk on credit approved accounts is limited by time, typically, to 90 days), or on a full recourse or split risk basis. We can factor accounts on a notification basis, where your customers are told of our purchase, or on a non-notification basis. Depending on the transaction, we can buy all accounts, as they arise, upon your delivery of the subject goods and services, or only those accounts which you choose to offer to us. We also provide “spot” factoring where you sell us just a single (or a very few) invoices on a one-time basis.
Beyond factoring services, Capitol National Factors also offers purchase order financing and, under Accounts Receivable Financing Agreements (as distinguished from Factoring Agreements), asset-based loans.
4. Reasonable Factoring Fees
The cost of factoring invoices has come way down over the years with advances available up to 90{02115a97f543f71ff28ee6b3a582fffcb3fd1a0af346efedc87099d197bd3a25} and fees as lows as 1.5{02115a97f543f71ff28ee6b3a582fffcb3fd1a0af346efedc87099d197bd3a25}. The fees vary by industry, volume and number of invoices, advance rates, customer creditworthiness, and how long it takes customers to pay. To find out exactly what programs are available for your business please use our invoice factoring application.
5. Stay In Control
You need cash, not a boss! Factoring companies don’t dictate how you spend the funds. There are no requirements to buy equipment or other assets.
6. Relieve Stress
No more waiting on your customers to make payments so you can make yours. Pay bills, meet payroll, and remit taxes on time without worrying about late fees or damaged credit.
7. Increase The Bottom Line
Many companies use factoring to increase profits or fund growth. Take advantage of early payment discounts, negotiate bulk discounts from suppliers, increase inventory for large orders, or add the staff and overhead required to fund expansion. When structured thoughtfully it is possible to use factoring to either save or make money far in excess of the factoring costs.
8. Strong Financials Not Required
You don’t need great credit, years in business, or a long strong financial history to qualify for our factoring services. Capitol National Factors looks principally to the financial strength of your customers paying on the invoices, rather than you. That is good news if your credit or business has hit a few bumps in the road as you try to build (or re-build) your business.
9. Confidently Extend Terms to Customers
Increase sales with the ability to offer credit terms to new or large customers without hurting cash flow! Plus, when you factor accounts without recourse, Capitol National Factors accepts the credit risk on credit-approved accounts, giving you peace of mind that you can still collect, if an invoice cannot be collected solely because your account debtor becomes bankrupt or is otherwise financially unable to pay, within the credit risk assumed by us for the particular transaction.
10. Professional Receivable Management
Save time, reduce in-house expenses, and improve the turn time on your receivables with professional management. For both nonrecourse and recourse factoring facilities Capital National Factors typically handles all the headaches and paperwork involved in receivables management, ledgering and collection.
By lessening risks of bad debts, and raising cash flow from purchase date advances, it’s easy to see why so many businesses are using factoring to pay bills, fund growth, increase sales, meet payroll, maintain a good credit rating, or take advantage of early payment discounts.
If you would like to know your options you can get started today with our convenient online factoring application!