For example, if you run a staffing company and you’ve been offered an advance rate of 80 percent, you’d receive up to $8,000 of a $10,000 invoice immediately after you submit documentation to your invoice factoring service, minus any fees the factoring company charges, of course. It’s somewhat common to see advance rates of 70 to 80 percent depending on your industry. The advance rate is the percentage of the invoice amount you’ll receive upfront. Now that you have a general idea of the process, let’s go over a few factoring agreement terms you’re likely to see if you decide to move forward. Common Fees and Terms in Factoring Agreements Your factoring agreement or factoring contract will spell out all the factoring terms involved, so you’ll want to pay close attention to the details just as you would if you were reading a loan offer from a bank. The factoring company will wait for payment and ultimately collect from your debtors. You can use the money to cover payroll, purchase equipment, manage growth-related expenses like marketing, or whatever makes the most sense to you right away. The Factoring Company (Factor) will act as a creditor and pay you upfront, so you’re not stuck waiting 30, 60, or 90 days for your client to pay. You can think of it as getting an advance on your unpaid B2B invoices or selling them to a third party at a discount rate. Sometimes referred to as accounts receivable funding, the invoice factoring process turns your unpaid invoices into immediate cash. In this article, you’ll get a full breakdown of the process as well as common factoring and security agreement terms, so it’s easy to see how it might fit in with your business plan. But, how exactly does invoice factoring work, and what makes it so radically different from other funding solutions? If you’re a small business owner, invoice factoring can be a crucial lifeline when the money runs short, an easy way to accelerate cash flow on an ongoing basis, and so much more.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |