invoice factoring

Invoice factoring can help to solve your cash flow problems. Do many of your clients take 30 days or more to pay? Invoice factoring could be the answer to this problem.

With invoice factoring you sell the debt of a particular invoice to another company called a factor. This will be sold for less than the invoice is worth. You will not receive the full value of the invoice, but you will not have to wait for the client to pay the invoice before you receive the money.

The factor will tell you how much they will pay you for the invoice and you will receive a percentage of this money up front.

Once this is done the factor will usually inform the debtor that they now own the debt and the factor will be responsible for collecting the money. Also if the debtor does not pay the money owed, it is the factor that will take this loss or be responsible for taking further actions to recover the money owed.

As the seller of the invoice, you will get the upfront payment quickly and this guaranteed regardless of whether the payment is ever collected from the debtor. The only downside to you as the seller of the invoice is that you will not receive the full amount of the original invoice.

Once the debtor has paid the factor you will receive the remaining amount of the money owed to you by the factor. So basically you will receive your money in two parts. One the initial amount paid as soon as the deal had been struck with the factor and a second amount once the money has been collected from the factor.

Some factors will charge you interest based on how long it takes for the debtor to pay. Also some will charge a flat service charge. These will be deducted from the amount the second payment you receive from the factor.

As the seller of the invoice you must not collect the money from the debtor for the invoice you have sold. This is forbidden as the money owed for this invoice is no longer owed to you. You can of course collect money owed by the same debtor on other invoices that you have not sold.

There are many invoice factoring companies and it is a good idea to shop around to make sure you get the best deal. There are various elements to compare when looking for invoice factoring services. These include the percentage that you receive of the total value of the invoice, are their additional charges associated with the transaction and do you get charged interest based on the time it takes the debtor to pay.

Invoice factoring is different from a bank loan. You are not borrowing money, but simply selling your invoices to another company. Many businesses that are not able to get a loan will be able to use invoice factoring services.

invoice factoring


,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,...............................................