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How Do Factoring Companies Work?

What you need to know about invoice factoring companies

Invoice factoring is a form of funding that provides immediate cash to businesses by selling their accounts receivable.

So, how do factoring companies work? As a small business owner, you may be facing cash flow problems. These problems are likely putting a crimp in your business funding and expansion plans. A common cash flow headache is slow invoice processing by your clients. Instead of paying you in a timely fashion, they may have extended invoice processing schedules of 45, 60 and even 90 days or more. This puts you in a bind and looking for an answer on how to get your money faster. But how can you make your clients pay on a quicker schedule so you can improve your cash flow?

Well, you may not be able to get them to pay faster, but there is a way to get the money your slow-pay clients owe you in a quicker, convenient and effective way. It’s called invoice factoring. You may have heard of the term but aren’t sure what it means. Invoice factoring is a business funding solution whereby a factoring company, such as Charter Capital, will “buy” your invoices and accounts receivable from you. You get immediate cash to fund your business, pay your employees, buy new equipment or supplies, or to expand your firm. The factoring company is now the one responsible for collecting what had been your invoices. You’re relieved of the burden and the waiting. Instead of an unpaid invoice and a cash flow problem, you have the funds you need to be a success and grow.

For those wondering, the term “factoring” simply refers to the process of a third party – called a factor or factoring company – collecting on an invoice originally issued by someone else.

You still may be wondering: How do factoring companies work?

You may think factoring companies are something new. Not at all. Invoice factoring and factoring companies have actually been around for centuries! It’s a tried and true method for business funding and works especially well for small businesses, which are often prone to cash flow problems and need assistance from time to time. Invoice factoring and factoring companies such as Charter Capital provide that assistance.

Invoice Factoring Companies for Small BusinessNot only is invoice factoring a quick, convenient and effective business funding solution, it’s much easier and carries less risk than taking out a bank loan. With a bank loan, you must submit a business plan and tax statements, then wait for the bank to make a decision. If the bank grants a loan, then you must make regular payments until the loan is repaid. With invoice factoring, the factoring company asks for none of those things. You simply submit an invoice and receive immediate cash in return. Even better, you’ve nothing to repay later on.

Invoice factoring enables you to outsource your accounts receivable. The factoring company is now your accounts receivable department, available at a moment’s notice. Rather than spending your time and effort trying to collect on invoices, you can get paid for them today and devote more to focus on what’s really important – your business.

As the factoring company pays you immediate cash for your invoices, you now have the needed capital to accomplish your goals. Business funding is less a concern. Your accounts payable problems ease. You have greater financial flexibility to grow, expand and even take advantage of early payment rewards or gain discounts from your vendors. Finally, invoice factoring can provide a way for you to better monitor your customer service and early detect potential problems.

To learn more about invoice factoring, how it can help you solve cash flow problems and deliver efficient business funding answers, call Charter Capital today. Our knowledgeable representatives understand the funding needs of small businesses and the problems they face. Let us introduce you to the convenience and security of invoice factoring.

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