What is Accounts Receivable
Factoring?
Business
Definition for: Factoring
The practice of transferring title
of accounts receivable to a third-party (the factor) at a
discount, in return for prompt cash. There are many ways to maintain a positive
cash flow when
growing your business and dealing with accounts receivable
issues. One popular way to increase cash flow is a form if
business financing called factoring.
Accounts Receivable
Factoring (also known as Invoice Financing) is
the practice of selling your accounts receivable (invoices)
at a discount to a factoring company. You get the money from the
factoring company that you sold your accounts receivable to and they
become responsible for collecting on the invoices. The
reason many companies decide on this type of business
financing is to ensure the
continuous cash flow to the business. Essentially,
businesses who use factoring as their business financing
choice are focusing on having most of
the money now rather than all of it later. It can take time
to collect on an invoice, so when a company finances its
accounts receivable, they are getting their money faster
and without the hassle of the collection process. With
small businesses, it is even more important to free up working
capital through factoring. The money can
be invested into new equipment, used to pay bills, or used
toward payroll. Of course, the alternative is to chase the
customer for the invoice payment and defer everything else
while the money is tied up in the collection process. In
order to fully understand factoring, you should be familiar
with the service: You may consider the following ideas so
that you may have a better understanding of factoring. It
could be best option for your business.
Is Invoice Factoring a type of loan?
No. Even though invoice factoring is commonly referred to as “
factoring loans”, it is a financial transaction between the business seeking funds and the factoring company, but no bank. Accounts Receivable Financing (Invoice Factoring) is when a company, like Charter Capital, purchases your accounts receivable invoices at a discount and provides you with immediate cash.
Compare Factoring vs. Bank Loan
Accounts Receivable Factoring is a
no-loan alternative to business financing
As an alternative source of business financing,
invoice factoring eliminates many of the difficult-to-meet criteria
of a traditional bank loan. If you can get a loan or line of
credit in today's tight banking market, what are you going to do after you've spent those funds? You are still going to be waiting for the invoices to be paid. The biggest problem with
a traditional bank loan is that there is a maximum credit limit. Whereas
Charter Capital provides no-loan cash based on the quality and liquidity of your assets
(your accounts receivable). Because each account is
evaluated individually, Charter Capital has much more
flexibility than a Bank when it comes to keeping up with an
increase in sales. How Much Does Accounts Receivable
Factoring Cost?
As we all know, Accounts Receivable Factoring is not free, but when used
properly, it can more than pay for itself. The idea is to have cash in hand rather than
chasing the full amount of the invoice. Typical fees are a
few percent of the invoice amount depending on several
factors such as the volume of factored invoices & how long
your customers take to pay. Some of our fees are as
low as 1.5%. Regardless, when you use accounts receivable factoring to grow your business, your bottom line
should increase because the additional profitable business
you are now able to add and should more than offset the
factoring costs.
How Do You Know Charter Capital is the Right
Accounts Receivable Factoring Company for You?
If you are a small business to mid-sized business owner
who has made the decision to acquire business financing by factoring
your invoices, you need a factoring company like Charter Capital.
No-loan business financing from Charter Capital provides your company with the
cash flow and
experienced professionals you need to grow your business.
Compare Factoring vs. Bank Loan Accounts Receivable Factoring Is Your Simple Cash Flow Solution.
At Charter Capital, the process is very simple. Your first
step is to contact us. Give us
a call or fill out our
online application. This process should take you just a
couple minutes and we will be able to contact you with
pricing in less than 24 hours. Once we have set you up with a
factoring line, obtaining cash for your accounts receivable in less than 24
hours is simple and easy.
- You provide your service or product to your customers
as you always have.
- You continue to bill your customers as you always
have.
- You submit your invoices that you want to factor to
Charter Capital along with our simple factor form.
- We wire your funds directly into your bank account.
Typically, in less than 24 hours.
- We wait for your customer to pay us directly. When we
receive payment, we notify you on the same day.
- You continue to grow your business, free from the
worry of your cash-flow.
Benefits of Accounts Receivable Factoring
A Charter Capital accounts receivable factoring line is your key to growing your business.
With this type of financing, you are free from many of the restrictions placed upon your business by a traditional bank loan. Most
importantly, with factoring, you are free to grow without having to give up equity or control of your business.
Accounts Receivable Factoring will allow you to grow your business. No longer will you be afraid to turn down a
customer because you cannot grant them payment terms. No
longer will you have to turn down business because your
customer isn't going to pay you for 30, 60, or 90 days, but
you have to pay your employees on Friday. No longer will you
have to wait for your customer to pay before ordering more
material that you need for the next job. Most importantly,
with factoring, you can spend your time growing your business instead of worrying about
cash flow.
Factoring will allow you to increase your bottom line profits.
Accounts Receivable Factoring is a powerful tool to improve your financial position.
When you use factoring to grow your business, your bottom line should increase because the additional
profitable business you are now able to add should more than offset the factoring costs. In many business your net
margins increase too. Since you have already paid for fixed costs, like rent, office staff, etc, the additional sales
that you are able to make are your most profitable ones.
Factoring of your Accounts Receivable will help you manage your customer accounts.
Charter Capital can provide you with valuable information that can help you determine if a new
customer is a higher credit risk or not. Charter Capital can
also assist you in managing your customer accounts. That
being said, we know that every business is different.
Upon applying for factoring, we will listen to your needs as it involves
the collection process and we can customize a program just for your company depending on your particular needs for our
involvement. Many of our clients prefer to continue participating in the collection process in the interest of
preserving continuity with their customer relationships. As a financial incentive, the Client is rebated a part of the
discount fee based upon a schedule of declining days outstanding. Other clients prefer that we become more
involved and handle the collections process for them. Either
way, your customer will be treated with the same respect and
courtesy that you would personally give them.
Call or contact Charter Capital
today.
Call us toll free at (877) 960-1818
or email us today to find out how easy it is to
set up a Charter Capital FactorLine. One of our account representatives will be happy to visit with you about setting up your FactorLine.
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