Accounts Receivable financing (Factoring) is the selling of open and completed invoices for cash now. This kind of financing allows you to get paid now instead of waiting more than 30 days to be paid by your client, it can help cover costs of labor and material. Factoring typically focuses on the creditworthiness of your clientele that owes you the unpaid invoices versus your personal credit. Traditionally invoices are collected by the Factor directly from the client, in some cases you may be able to handle the payments of invoices directly.
Do I Qualify for Accounts Receivable Financing?
Business credit score of the orderer (client) is key in figuring out eligibility for this product. It is imperative the clientele you wish to factor are US based and creditworthy. Other factors include, industry type, your business public records and age of the invoices to be paid.
How Much Does Accounts Receivable Financing typically cost?
Typically rates average anywhere between 1-4% per month of the invoice amount contingent upon the creditworthiness of client. Costs are estimated to be around .01% to .0133% per day every calendar month the factored invoice is outstanding. Traditionally costs are significantly less than alternative products or unsecured debt instruments. Depending on the factoring agreement there may be additional one time service fees or account setup fees and rates are contingent upon Non-Recourse or Recourse Factoring Agreements.