Invoice Factoring During Crises
Invoice Factoring During Crises
What is invoice factoring?
Invoice factoring is a fast way for businesses to get cash funding operational expenses while waiting customer to pay invoices. It is not a loan, it selling invoices to third party lender at discounted rate. The price a business pay to factor an invoice is similar or less than a loan cost, and more.
It is provided usually by factoring company, or as invoice financing, and sometimes as asset based lending tool, independent finance providers, banks, and private equity lenders are usually doing this type facility.
How invoice factoring works?
- The business client seeks invoice factoring providers
- Enters into an agreement with the proposed invoice factoring provider, term contracts are typically 24 months
- Invoice factoring provider will advance some funds upfront based on invoices sent from the business client
- Invoice factoring provider typically will finance 70 to 85% of the invoice value
- When the business client contractors comes to pay, invoice factoring provider will collect its debts and credit the remaining balance to the business client, after deducting its fees.
Benefits and Advantages of invoice factoring
- Without giving up equity, the business client can turn receivables to cash.
- Simpler process than loans.
- Business client get the ability to offer better and competitive credit terms to its customers.
- Purchasing power and vendor management process turns to advantage to the benefit of the business client to do early payments and benefiting from early payments discounts.
- Business client can focus on business growth rather than spending budgets in accounts receivables and money collection.
- Improves the business clients credit scoring.
- Helps the business client to focus on work and make early closing for projects, in result shortening the delivery process.
- The invoice-factoring provider can play a significant role on detecting early problems with customers.
- Enhances the business client professionality, through robust monitoring carried out by an external party.
Looking for invoice factoring resources
Invoice factoring is uniquely important for small business during crises period, business client can invest in needed equipment, pay vendors early, and manage business expenses like payroll. The alternative us to go after customers for payment and delay everything else while the cash is tied up to the progress and to the collection process. Invoice factoring guarantees business clients early cash.
At Charter Capital, our simple and easy accounts receivable financing process give your business debit-free cash flow solution – with no waiting, visit chartercapitalusa.com and explore Charter Capital solutions.
About the author: Jawad Alalawi
Information Technology Professional specialized in Financial Payment Services, Risk Management, Information Security, and Compliance. Experienced in solutions development and implementation, and technology writer.
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