Which is the best factor finance company for my business?

Factoring your accounts receivables can open your business up to much needed cash flow. A factor finance company will buy your accounts receivables at a discount (from their face value) for immediate cash. You can get up to 95% of the face value of your invoice within hours of invoicing your clients.

How do you find a factor finance company that can service your industry. Not all factors service every industry. Some factors specialize in specific industries.

SOLUTION: Factor Bid

Factor bid matches business’ with factor finance companies. You’ll get a few competitive offers from competing factors to buy your accounts receivables for immediate cash.

The best factoring company for your business will depend on the unique characteristics of your business and most important your specific requirements. For example; are you strictly looking for the lowest rate? If yes, then recourse factoring may be your best option. If you’re looking for back office ‘bookkeeping’ assistance and to lower your liability on collecting your open receivables, then non-recourse factoring may be your best option.

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Visit www.factorbid.com to get a few offers to buy your invoices for CASH!

The main aspect of any factoring company’s proposition is the structure of their facility, service offering and pricing.

Structure of a facility:

It’s important that the facility is structured to meet your business needs. Some lenders may not be able to structure a facility to meet your specific needs. That’s why it’s important that you get a few offers from competing factors within your industry. Not all factors will be willing to work with you once they run their in-house liability equation. This equation has a lot to do with risk vs. reward, the amount of risk they have to endure before they receive a suitable reward.

Service Levels:

Service levels may fluctuate from factor to factor. It’s hard to gauge the type of service performance you’ll experience before committing your company to a 12 month agreement. This is another reason to use factor bid to find the right factor finance company for your business. Factor bid personally on-boards each and every one of our participating factors. If we’re made aware of any  negative feedback from business owners, we reach out to the factors personally to see what the issues may be. Often times a little constructive criticism from a third party such as ourselves, help communicate and solve underlying issues and even prevent new ones from occurring.

Pricing of your factor finance facility:

In order to maximize your profits, you obviously want to minimize costs! It’s important not to sacrifice structure and service levels just to get the cheapest price. You may feel you are saving money, but if the service levels are so poor the small amount of savings may end up costing you more over the long run. Instead, use factor bid to get competitive offers at the exact same time, so you get the leverage you need to negotiate the best deal.

When factors know they’re competing at the exact same time for your business, they’re more likely to give you their most competitive offer upfront. Try factor bid today for free! You’re under no obligation to factor, however when you find how beneficial invoice financing is for your business, you’ll be glad you spend 2-5 minutes of your time to submit an invoice at factor bid.

Is your business mobile? Grab Factor App for factor financing on the Go!

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Factoring rates explained – Why 3% for 30 days doesn’t equate to 36% APR Interest

Factoring Rates Explained

Why 3% for 30 days doesn’t equate to 36% APR Interest. The belief that Accounts Receivable Factoring is too expensive, typically is based on the lack of understanding of what the actual factoring rates represent.

Factor Finance Companies (Factors) do not loan money at a rate of interest. They supply your growing business with working capital (and when you do well they do well). They do this by purchasing your invoice ‘receivable assets’ at a discount of the face value amount of the invoice. For this, factoring ‘rates’ represent a percentage discount in the sales transaction, not the traditional ‘bank style’ interest rate on a loan.

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Let’s take a look at an example;

If you have a $10,000 dollar invoice that is due to be paid by your customer 30 days from now, a factor may offer to buy the invoice for $9,700 dollars in cash, which is called the advance (and can be wired or ACH into your bank account within 24-48 hours) with the remaining balance being paid to you (less the factors fee) when the invoice is actually paid in full by your customer (called the debtor). Based on the scenario above, you would have agreed to discount your invoice by $300 dollars, or 3% of the face value.

The advance rate depends on what you have negotiated with the factor and some other key variables like the credit worthiness of your client,their payment history and the amount of the invoice. Usually the factor finance company will advance 80-90 percent of the face value of the invoice.

If a factor company tells you they will buy your invoice at a rate of 3%, that rate is not the interest rate on the loan, instead it’s the percentage discount the factor requires to get your business immediate cash today, for invoices they won’t collect on for 30 days.

Invoice financing is a strategic way to grow your business faster and will help cover payroll from additional employees, supplies, day-to-day expenses, investments and strategic overall business growth.

On average factoring discount rates range from .6% 1.4% for every 10 days an invoice remains outstanding from its original agreed upon due/payment date.

Factoring discount rates are transactional rates, where the amount of the discount is the factor finance company’s fee for the sales transaction – not that much different than the fees Credit Card companies charge merchants to advance them cash on their credit card sales.

A common misunderstanding about the costs associated with factoring arrises when financial professionals and business owners try to company interest rates to transactional rates. These two rates, as we’ve described are very different.

Example;

If you business sells $100,000 thousand dollars worth of invoices to a factor, and the factoring fee is $3000 dollars on invoices that are paid in 30 days; the tendency is to take the 3% fee – multiply it by 12 months and assume the factor is earning a whopping 36% return! That conclusion, however is false. The factor doesn’t collect $3,000 or 3% every month. The factor collects a 3% fee once, as the result of a single sales transaction. Same scenario if you were to discount your own service / product to your customer at a 3% discount.

Another way of looking at it – if you give your best customers a 3% price discount every month over the next year, does that mean you’ll have discounted your product or service by 36% by the end of the year? Of course not! If your profit margin on your product or services is 10% every month, your annual profit margin is still 10% annually.., not 120%!

Ask yourself – how much more money could your company make if you could recover your working capital immediately. On $100,000 dollars in “outstanding invoices” if your company could get $80,000 – $85,000 dollars within 24-48 hours, how much faster could your company grow.

In the examples above if your company’s net profit margin is greater than 3%. Any additional business you generate by accelerating your receivables provides your business with additional profits. You know the saying, we all know the saying – “it takes money to make money!” So if your business is generating invoices, that means you’re running a good business, it’s time to “Cash In” on your hard work so you have predictable cash flow every month to pay for additional employees to help you run grow your business, additional day-to-day expenses, supplies, investments, equipment and more.

Now that we know factoring can help your business grow at a much faster pace and become more profitable in less time, what’s the right factor finance company for your business type? Good question. Smart business owners use www.factor.bid to find the best factor in their industry and get the best rate when factoring.

Factor bid matches your business with the top factor finance companies that compete to buy your invoices for immediate cash. Before you decide which factor finance company to partner with, make sure and get the leverage you need to negotiate the best offer.  Factor bid gets you a few competitive offers to buy your accounts receivable invoices, so you get the best deal and most money when factoring your outstanding receivables.

 

Why now? Factor App for AR Financing and the more money for your Receivables when Factoring!

Why now – Factor App

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Technology is turning workflow and processes in the financial services industry upside down. Tasks once handled with paper money, bulky computers, and human interaction are now being completed entirely on digital interfaces.

Given how financial services are spreading widely throughout the world, the disruption opportunity for fintech startups is huge.

Almost every type of financial activity — from banking to payments to wealth management and more — is being re-imagined by startups. Meanwhile, the traditional Corporate financial sector is trying to solve a puzzle presented by the fintech revolution: How can they benefit from the rise of digital, and how can they avoid becoming obsolete?

Describe Fintech:

  • Fintech — financial technology — is an umbrella term describing disruptive technologies in financial services. Fintech has transformed the way money is managed. It affects almost every financial activity, from banking to payments to wealth management. Startups are re-imagining financial services processes, while incumbent financial services firms are following suit with new products of their own.

If you need immediate CASH FLOW for your business, download Factor App today and start Factoring your Accounts Receivable Invoices for Immediate Cash.

  • Reduce Liability
  • Increase Cash Flow
  • Get Paid as Soon as Today!

for iPhone – https://itunes.apple.com/us/app/factor-app/id986225387?ls=1&mt=8 (download link)

for Android – https://play.google.com/store/apps/details?id=com.factor.bid           (download link)

Download Factor App – Get immediate cash and the best deal for your Invoices today!

Factoring

Even when running a profitable small business, cash-flow issues arise, especially if you’re customers pay for goods and services over 30-90 days instead of immediately.

One way to solve cash-flow problems is with invoice factoring, where you turn your unpaid invoices into immediate cash. But like every financial product, invoice factoring has it’s pros and cons and may not be a good fit for your small business.

Overview of invoice factoring

Invoice factoring is a financing option for business-to-business (B2B) companies that need help managing cash flow due to slow-paying customers. Factoring enables your business to convert its account receivables — money owed by your customers — into immediate cash.

Invoice factoring is technically not a loan. Rather, you sell your invoices at a discount to an invoice factoring company in exchange for a lump sum of cash. The factoring company then owns the invoices and gets paid when it collects from your customers, which typically occurs within 30 to 90 days.

Let’s say you own a Logistics transportation company, creating thousands of dollars a week worth of accounts receivable invoices. Most of your customers agree to pay off their invoices within 30-45 days, but you need immediate cash to pay employees, buy diesel fuel and other daily expenses, creating a cash-flow shortfall.

You could turn to a traditional banks for a loan, but it requires collateral (a physical asset, such as real estate, which can be sold by the lender if you default) and high personal credit score. Or maybe you qualify but don’t have time to wait several months for the loan to close.

So you turn to an invoice factoring company, and the factor agrees to buy your invoices for $9,700 in cash, less a 3% factoring fee ($300). The invoice factoring company then advances 85% (or $8,245) of the invoice within a few days (although the actual size of the advance will depend on numerous factors, including the total amount of the advance, the age of the invoice and the customer’s creditworthiness). The factoring company then collects the invoice when it’s due and advances the remaining balance owed to you ($1,455).

The factoring fee, also known as a discount rate, can cost anywhere from 1% to 5%, depending on the invoice amount, your sales volume, your customer’s creditworthiness, and if it’s a recourse or non-recourse factor.

If the contract is a recourse factor and the customer doesn’t pay, you may have to buy back the unpaid receivable from the factoring company or replace it with a more current receivable of equal or greater value. If it’s a non-recourse factor, you’re under no obligation to repay or replace the unpaid receivables, but you’ll likely be charged a higher transaction fee because the factoring company takes on the added risk of not getting its money back.

Reasons to use invoice factoring

  • Fast cash: Invoice factoring can provide immediate working capital to help cover a funding gap caused by slow-paying customers. You then have the freedom to pay your bills, meet payroll demands, buy equipment and grow your business. Factoring enables you to focus more time on your business and not chasing customers for overdue and/or late payments.
  • Easier approval: Invoice factoring provides financing to companies that might not be able to get capital from other sources, such as traditional banks, due to a lack of collateral for a loan, poor personal credit, or a limited operating history. Invoice factoring companies typically only care about the value of the invoices you are looking to factor, as well as the creditworthiness of the customers.

Things to look for when invoice factoring

  • Costs: You have to watch out for hidden fees, such as application fees, a processing fee for each invoice you finance, credit check fees or overdue fees if your client is past due on a payment, which can increase your APR.
  • Reputation: Because the invoice factoring company collects on the invoices directly from the customer, you need to make sure it’s  handled professionally.
  • Dependence on customer’s credit: The factoring company may need to verify the creditworthiness of your customer. If the customer has a history of late or missed payments, you may not be approved for the financing.

Alternatives to Invoice Factoring

INVOICE FINANCING

Invoice financing, also known as discounting or accounts receivables financing, is a bit different than factoring in that you aren’t selling your invoices to a factoring company. Instead, you use the invoices as collateral to obtain a cash advance and you are still responsible for collecting the invoice amounts yourself.

  • Improve cash flow: Just like invoice factoring, it allows you to keep loyal customers on longer payment terms. This feature can improve your cash flow and help you grow your business.
  • Maintain control: You keep control of your accounts receivables and the collection of payments. This is likely a better option for business owners who prefer to handle collections themselves. Because you control your accounts, it’s likely your customers won’t even know that you’re borrowing funds against the invoices they owe you.
  • Credit score not as important: Invoice financing companies care more about your business and the creditworthiness of your customers than your personal credit.

RECEIVABLES-BASED LINE OF CREDIT

A receivables-based line of credit is another invoice financing option for small-businesses. This is a short-term line of credit that is secured by the borrower’s unpaid accounts receivables. It’s structured as a credit line instead of a purchase of your accounts receivables.

Borrowers should understand that a line of credit isn’t like your standard loan, where you get one big cash advance of funds that you need to repay monthly. Instead, it works like a credit card: You get access to a sum of money and you borrow and repay it as you like.

Most credit lines only charge interest on the money you’ve actually borrowed. However, the credit line may come with an end of draw date when you’re no longer able to borrow and you must repay the outstanding balance in full at that time.

  • Flexible: A line of credit can provide you with the financial flexibility to manage cash flow and run your small-business. You have access to cash that you can borrow and repay as needed. This can help you better manage cash flow or unexpected expenses.
  • Maintain control: You maintain control over the relationship with your customers and will remain responsible for collecting invoices.
  • Low cost: Asset-based line of credit costs 10% to 25% APR plus the prime rate (3.5%), making it less expensive than your invoice financing and invoice factoring options.
  • Variable rate: Lines of credit usually carry a variable interest rate, which means your payments can rise or fall depending on the prime rate. However, this will depend on each lender, and a fixed-rate option may be available.
  • Secured by receivables: Because the receivables are used as collateral for the line of credit, if you can’t repay the line of credit, you will likely have to forfeit these assets, although this will depend on the lender you choose.

Conclusion

Invoice factoring and invoice financing are suited best for established B2B companies that have reliable yet slow-paying customers, which results in a high accounts receivable balance and/or a funding shortfall. These can help immediately to add working capital by utilizing your business accounts receivable assets.

Get the best deal when Invoice Factoring

You can shop your accounts receivable invoices using Factor App. Download Factor App to get the best deal for your invoices. Just like any financial product, it’s important to shop around and compare lenders to get the best deal. At Factor App, Factors compete to buy your invoices, so you get the best deal!

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Turn Accounts Receivable Invoices Into Immediate CASH – Factor App

FACTOR

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Factor App – Fast, easy factoring using your Smartphone!

Download Factor App to SHOP your accounts receivable invoices for the best deal! (Factors compete to buy your invoices)

“If you’re not shopping your invoices, you’re loosing money!”

for iPhone – Download here

for Android – Download here

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Are you thinking about factoring your accounts receivable invoices for cash? Use Factor App and make ’em compete for your invoices!

Factor.bid – Where factor banks compete to buy your invoices.

Turn Invoices – Into CASH

It’s easy:

  1. Download Factor app
  2. Snap a picture of your invoice or upload an invoice as PDF file or picture file
  3. Click submit, and within a few minutes you’ll have competitive offers to buy your accounts receivable invoice.

If you’re not shopping your invoices, you’re loosing money!

Factor App “Get paid as soon as today!”

 

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