There are two types of invoice financing: traditional invoice factoring and invoice discounting. Traditional factoring offers larger amounts of capital, but it is also costlier, and you have to be OK with the factor contacting your customers. Invoice discounting provides smaller amounts of capital but at lower rates, and it doesn’t require client contact. Invoice…
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Top Alternatives to Invoice Factoring
While invoice factoring may be common in certain industries, it is not a one-size-fits-all financing solution. It does not address large capital needs, and it requires an ongoing invoice assignment. It is also active financing, so even if the business doesn’t utilize the capital, it still must pay a fee. The top alternatives to invoice…
Filling Out an Invoice Factoring Application in 6 Steps
An invoice factoring application can be completed in six steps, most of which require providing the information a factoring company needs to approve you for funding. The process can take from one to five days, depending on the number of invoices and the speed with which you provide additional information. Once you complete the initial…
10 Factoring Advantages and Disadvantages
Invoice factoring can help small business owners save time, access funding without collateral, finance growth, and receive large amounts of capital quickly. However, there are sometimes drawbacks like reduced control over invoice collections, the stigma of alerting customers to a factoring relationship, the high overall costs, and a reduction in profits. Each of these factors…
Understanding Invoice Factoring Rates & Costs
The best way to figure out the cost of factoring invoices is to work directly with an invoice factoring provider. Most will charge a discount rate and several fees to ensure they are compensated adequately for the risk they take by providing funding. By understanding the fees and estimating potential costs, small business owners can…
Invoice Factoring Contract Terms
Invoice factoring terms include the funding amount, advance rate, repayment terms, personal guarantee requirements, and speed of funding. In general, the most important term to maximize is the advance rate because that directly impacts the cost of capital. The other important term is the funding amount, which you should ensure is sufficient to make factoring…
Invoice Factoring Requirements
Invoice factoring companies have a unique set of requirements that usually don’t include measuring a business’s individual credit or time in business. However, there are restrictions on the type of invoices that can be factored, the creditworthiness of a business’s customers, and even the volume of invoices that need to be factored to qualify. Invoice…
Is Invoice Factoring Right for Your Small Business?
To determine if any financing solution, including invoice factoring, is right for your business, it must meet three criteria. It must be accessible, affordable, and beneficial to the business. To evaluate an invoice factoring company you should consider the costs, terms, qualifications, application process, and some benefits and drawbacks of this financing solution. Invoice Factoring…
What Is Invoice Factoring?
Invoice factoring is a type of financing that converts invoices due within 90 days into immediate cash for your small business. You submit an outstanding invoice to the factoring company, and it provides you with part of the invoice value for a small fee. It’s different than invoice discounting, which uses the invoices as collateral….
What Is a UCC Filing & How Does a UCC Lien Work?
A UCC lien filing, or UCC filing, is a notice lenders file when a business owner takes a loan against an asset. A UCC filing gives lenders a claim on assets a debtor pledges as collateral. The term originates from the Uniform Commercial Code (UCC), a set of rules governing commercial transactions. When a UCC…
SBA Loans: What Is an SBA Loan?
When a small business owner needs financing, the first option to come to mind is usually a loan through the Small Business Administration (SBA). While many people are familiar with the term “SBA loan,” they often aren’t clear on what these loans are, or even how to get them. We’ve provided a general overview of…
SBA 8(a) Certification Requirements
SBA 8(a) certification requirements are primarily focused on the owner or owners of the business, their social and economic status, and net worth. While your business must be operating profitably, there are no debt-service-coverage or credit score requirements. When it comes to qualifying for the Small Business Administration 8(a) program, the certification requirements are, in…