Getting Started With Factoring And Accounts Receivables Financing

Posted by Phineas Gray on May, 2015

It is a very good practice as a small business owner or entrepreneur to always complete your own personal research on any new source of funding for your business. Many small business owners are not familiar with the option of factoring and utilizing accounts receivables financing to address gaps in funding.

The Model

The model or the system of accounts receivables financing, also known as factoring, is very simple. It is the sale of your accounts receivables (AR) to a third party, known as a factor.

The factor assumes the risk with the collection of the AR while your company is provided with a percentage of the value of the invoices you choose to sell. This percentage will range between 80 to 95% of the total value based on several different components the factor will consider.

The small business will receive the funding within a few days of the application, typically not more than 5. This allows immediate use of the funds on the closed sale rather than waiting for the payment to come in 30, 60 or 90 days later.

The factor collects the invoices and provides you with the balance on the AR less their factoring and other fees. These fees should be clearly indicated so you can be fully prepared for any charges incurred in the transaction.

The Competitive Advantage

When selecting a firm to handle your accounts receivables financing you will earn a competitive advantage over the competition. You will have access to funding to grow, expand, or take on new business without having any business debt. This is very different than a loan or a line or credit, both which are limited based on the net worth of the business and the sales. They also require a personal guarantee, which can impact business as well as personal credit.

Instead, using a top firm offering accounts receivables financing will allow your business to:

1. Complete applications online through a simple, streamlined process with approval in 24 hours

2. Apply for service at no cost

3. Work with a recognized, respected and trusted company offering accounts receivables financing

4. Choose the products and services offered by the accounts receivables financing firm best suited to your business needs and purposes

5. Take advantage of factoring firms with highly rated customer experiences from small business owners just like yours

Looking into the benefits of accounts receivables financing for your small business is an excellent option for a small business requiring short-term funding based on closed sales. It is a safe, effective and risk-free option to give you the cash flow you need without taking on any business debt.

At United Capital, we have been providing small businesses with accounts receivables financing since 1997. To learn more about how factoring can help your business see us at.