Five Myths About SMB Invoice Financing, Debunked!

5 myths about invoice financing debunked:

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Myth: 1 – Expensive – “A rate of 1.2% per month equates to 18% annually. That’s a very high interest rate compared to what my bank will give me.”
Debunked – True, rates are around 1.2% per month. However, receivables financing can offer no origination fees, no prepayment fees or un-used line fees often seen with a traditional line of credit. There is also no commitment; you can finance as needed. While rates on a traditional loan may be lower, the terms and conditions of the loan may cost you more in the long run, including the waiting and time to get funds.
Invoice Financing is based on the creditworthiness of your customers, instead of your business’s credit. This means if you’re working with larger clients that are more established, factoring will enable you to extend terms to remain competitive amount your competitors.

Myth: 2 – Appearance – “A company that sells invoices is in trouble with traditional sources of credit, and needs alternatives lending to keep the doors open. This may show my customers that we have very slim margins and are not making a ton of profit off of the business relationship.”
Debunked – Invoice Financing grows with your business. Traditional lenders like banks tend to look at the past and have stringent requirements and paperwork to qualify for a commercial loan. Financing your receivables actually keeps up with growing sales volume by extending you larger amounts of upfront capital as your accounts receivables increase. Invoice factoring is fast and makes your company more flexible to meet the demands of larger customers.

Myth: 3  Customers Relations – “I have been doing business with customer-ABC for the past 4 years and don’t want to jeopardize our relationship by adding a 3rd party payment collector. A financing company will pester my customers for payment, which will damage the client relationship.”
Debunked – As business professionals your clients understand that when you’re factoring it’s because you’re extending terms so they can pay you at a later date. They’re essentially using your money to grow their business faster, so you may as well use the factor finance company’s money to grow your business faster.  Some factors will also stay out of the transaction all together, this type of option is very popular among transportation freight brokers.

Myth: 4 – Too Early for Credit – “Our new SMB business has little to no credit history, and as a result we can’t get financing from our local bank. We heard that Invoice Financing companies have the same credit requirements!”
Debunked – Invoice Financing companies base their decision using your customers payment and credit history, not yours. Your customer (the debtor) is the one responsible for pays the invoice, so factor finance companies are mostly interested in their creditworthiness overall.  Larger, Fortune 1000 companies and government entities are the best customers for a small business to factor finance their receivables from because there is plenty of information publicly available to check their payment and credit history, allowing a vendor to piggyback on their credit rating, while increasing their own business credit history more quickly.

Myth: 5 – Loss of Control – “All payments coming to my business are routed through a 3rd party. I lose control of my accounts with a factor finance company. Plus I get stuck in contracts that restrict business rather than helping.”
Debunked – True, payments need to be made by your customers directly to the financier’s account. This is done for security purposes; the invoice is collateral for the advanced funding, and your factor finance company collects from the customer when they pay. At the same time, not all Invoice Financing companies are created equal.
When factoring, only customers that you want to finance must make accounts payable to your factor finance company. Receivables from customers that you choose not to finance can still pay you directly in the agreed upon time frame, usually net-30 or longer. All factor finance companies are a little different. With some there is not long term contracts and you can sell the receivables you want, when you want, which works great for seasonal business and oversize orders. Having to deal with a delayed payment cycle can strain existing resources and add unnecessary stress to your business. Debunking the myths of invoice financing can bring working capital to your business quickly and open new opportunities for many B2B and B2G small businesses.

Ready To Start: – Make sure that you’re getting a few offers from competing factor finance companies before you begin. Visit www.factorbid.com and within an hour you’ll have competitive offers to earn your business an buy your accounts receivable invoices for immediate cash. Factor bid is fast and easy and only takes about 2 minutes to start. You’ll be contacted by a few of the top factor finance companies that specialize in your specific industry within the hour of completing your customer application. You’re under no obligation to factor. Check out factor bid and get the knowledge and leverage you need to get the best deal when factoring your accounts receivables for immediate cash flow!

On The Go – Download Factor App – for fast and easy invoice financing!

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Cash Flow Plan B – business finance awareness

What is your company’s Plan-B and does it cover cash flow gaps caused by slow-paying customers?

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What would happen to your business if;

  • A vendor demanded you pay COD (cash on delivery) and won’t extend terms
  • Your Bank decides to reduces your credit line
  • A client changes its policies from paying Net-10 to Net-45

If your company’s cash flow relies on everything happening perfectly, you have a disaster waiting to happen!

When the unexpected comes knocking you won’t have time to maneuver or look for other options. It’s a good idea to have a Plan-B, that way you won’t be caught off guard by events you can not control.

*Remember – you can’t make payroll or pay vendors with an IOU. So when the unexpected happens you need the ability to keep moving forward. Convert money owed to you from customers to immediate working capital, so you don’t have to worry about cash flow gaps and unexpected annoyances.

With Factoring you won’t need to chase customers each week for payments. The factoring company assists in collecting on-time receivables and increasing cash flow so you can focus on bringing in new customer accounts and the day-to-day business operations.

Factoring gives you access to professional credit checking tools so you can know if a potential new customer is a good candidate for extending terms to.

No more worrying about sudden interruptions, because your plan B provides you access to fast cash when you need it most!

It’s recommended that when choosing the best factoring company, you get a few offers. Factor Bid is a free small business resource that enables your business to Compare Invoice Finance Offers.. Free! Get the knowledge you need to get the best deal when factoring your accounts receivable invoices for immediate cash!

Compare Invoice Finance Offers.. Free, small to mid-sized business working capital

Compare Invoice Finance Offers.. Free. If you’re a small to mid-sized business and can benefit from an immediate increase in working capital then take a look at Invoice Financing (factoring).

What is Factoring?

Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable (i.e., invoices) to a third party (called a factor) at a discount.

Are outstanding or slow-paying invoices holding your company back! Don’t stand by holding the bag, while your customers use money they owe you to grow their business. Take advantage of factor financing and let someone else finance your customers growth so you can focus on your own growth and increasing your annual profits.

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How do small to mid-sized business get immediate cash by factoring?

If your business invoices creditworthy customers on terms, then you may qualify for immediate cash flow from your accounts receivable invoices. Factoring uses the creditworthiness of your customers, not your business credit. If your a fairly new company and working hard to establish good business credit and payment history, then invoice factoring can help.

By accessing immediate cash flow, your business can afford to;

  • pay suppliers and earn volume discounts
  • pay off higher interest loans on your personal or business credit that you’re using to support your business
  • Cover payroll expenses
  • Fulfill larger orders
  • Take in more new customers

To find out more about how factor financing can help your business with credit checking customers, bookkeeping and accounts receivable management, increase working capital and build your business credit visit Factor Bid’s home page and click the get started button. You’ll be able to quickly and easily compare invoice finance offers from the top factor finance companies so you get the best deal when factoring your invoices.

Factor Bid is a free small business resource and you’re under no obligation to factor. Get the knowledge and leverage you need to negotiate the best deal when financing your accounts receivable invoices for immediate cash!

Grow your business faster and increase your bottom line with factoring.

What’s best, Invoice factoring or MCA’ Merchant Cash Advance

If you break down the Merchant Cash Advance product, it’s limited in the dollar amount that can be advanced. Essentially MCA is a credit card with lipstick and driven mostly by calculated numbers and smart automation systems, not by lenders managing portfolios like a factor finance company or commercial lender.

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Frustrations arise with MCA lines of credit, because a borrowers’ business account will be debited daily in most scenarios for an agreed upon payoff in 8-14 months. Your business is wired a lump sum and as agreed a large number is debited by the financier each day to reach your agreed payoff/payback date of terms. Principal pay back is not flexible and needs to happen quickly.

With factoring the lending lines are typically not capped at around $200,000 like with MCA and rather can be in the millions. Factoring repayment tends to be a little more flexible too. Repayment happens when your customer (the debtor) pays the outstanding invoice, not everyday like with Merchant Cash Advance repayment.

Both Factoring and MCA are filling a working capital niche and both have higher interest rates when annualized than say a traditional bank loan.

If your business needs immediate working capital to keep the doors open and your facing hardship or even just need immediate capital to increase your business operations, then factoring your accounts receivable invoices could be a viable solution for you. A line of credit based on your merchant sales may also be a business financing solution you want to pursue. Regardless of which type of business financing you choose, visit www.factorbid.com to get a few competitive offers from finance companies.

When finance companies know they’re competing for your business, you’ll get a few competitive offers and can decide which finance partner is best for your business needs today.

 

Your money – your business, run profits to the max, starting now!

Your money, your business! It makes sense to want to maximize your business’ profits. First review what you already have going on. For example your breakeven point. What are your cost vs. your profit? A good way to figure this out is to realize your breakeven point -where you quit loosing money or showing a negative return on investment.

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1.) Keep your breakeven point low:

This means watch your spending, both on a personal side and for your business expenses. Have you ever wondered why so many startups are launched by young entrepreneurs with little to no major financial obligations? It’s simple really-they tent to have no mortgage payment, no kids to support and are most likely to have a low monthly spend rate.

Your breakeven point is important because you really don’t know in which month/year you will in fact break even. So until this happens, spend as least as possible. Running your business in a lean manner by keeping overhead at a minimum will buy you more time to get your formula right, thus reaching your breakeven point much quicker.

2.) Maximize your ‘outside’ income:

Consider alternative sources of income. Tap friends and family to help out with some seed money to keep the lights on; a partnership agreement with an expert in a field that you may be lacking or not as familiar in. Remember 100% of a company that makes zero is much worse than owning 50% of a company that generates a profit every month / year. Think outside the box, use people in your network to help you grow your business. Every little bit helps define brand and guide you on the most efficient path to success.

3.) Seek other types of external funding:

If you still find your business is in need of additional cash flow to grow, consider grants, government loans and additional opportunity available from your local small business administration. For example in Arizona we have a platform called the Arizona Innovation Challenge, in which funds can be won by submitting your business plan / idea to a panel of advisors that will consider your company for capital investment, that does not need to be paid back and does not dilute your company stock or position.

If you’re managing all your resources correctly and see that your business is starting to have some success, and you’re adding new customers that want/need your products and/or services then you may want to consider leveraging your company assets to help grow your business faster. For example, selling your outstanding accounts receivable invoices at a discount of their face value (factoring) for immediate cash flow.

4.) Accounts Receivable Invoice Factoring: 

Did you know there are finance companies called (factors) that are willing to buy your open accounts receivable invoices for cash? You get paid for your invoices within 24-48 hours upon invoicing your customers. No need to wait 30,45 or even 60 days to be paid for work you’ve already completed and or products you’ve already sold.

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Image source: Google search keyword ‘invoice’

Why should you’re business struggle while your customers use your money / products / services to grow their business. With that being said, most companies do practice some form of invoicing and by doing so have to wait to be paid from their customers. A majority of business owners have discovered factoring and know that they are able to increase their business cash flow very quickly by partnering with a factor.

If your businesses is not in the position to become the financier of your customers, and waiting for payment just feels unproductive or unfair, then visit Factor bid to find the best factoring company to help finance your accounts receivable business asset invoices. Factor bid gets you a few offers from factor finance companies, so you get competitive offers and the best deal when selling your invoices at a discount. When factors know they’re competing to buy your invoices, there offers are going to be more aggressive in order to earn your new business.

When you practice smart business tactics like factoring your invoices, you’re able to utilize the factor financiers money to grow your business faster instead of your customers using your money to grow their business, while you sit and wait for payments.

Benefits of Partnering with a Factor Finance Company:

Factors help you steam-line your accounts receivable collection process and make sure your customers are paying as agreed. When selling your invoices and getting cash with 24 hours, you’ll have a good idea of what your predictable cash flow is every month. This is important in realizing your breakeven point as well as applying additional capital to key parts of your business that are generating revenue.

Factors also lend a hand with vetting new customers. Factors have tools that you can access that help you decide if a new potential customer is a good fit for your business – i.e., do the pay their bills on time, are they in good standing and ultimately making sure you get paid for your contribution.

Insure your money with non-recourse factoring, to help limit your businesses liability in collecting on open invoices,  like when a customer all of a sudden decides they don’t want to pay you.

As long as you’re bottom line increases, and your business profits continue to grow, the small fee a factor finance company charges is nominal in the grand scheme of things. The important thing is knowing you have that money and not worrying about customers failing to pay you.

Run your profits to the max – and grow your business efficiently by utilizing everything you have access to. If you ever wonder how your competitors are doing so well, there is a good chance they’re following most of the simple practices outlined in this post. Good luck and keep on working hard everyday and at the end of a month / year / 2 years, etc – you’ll have something you and your family will be proud of.

We’re brand new to factoring (invoice finance) what do we need to know on day 1?

We’re new to factoring (invoice financing) our business is growing quickly and we need more capital to hire more employees and pay our weekly expenditures. What do we need to know, day 1?

-First

How Do I Find The Best Factor?

That’s an easy one. Companies that want the best deal use Factor bid. At Factor bid, factors compete to buy your accounts receivable invoices, so you get the best deal when factoring.

-Second

What Do You Ask

Scenario:  You have an open accounts receivable invoice on your desk.  You want to get cash for that invoice now instead of waiting the 30, 60, or even 90 days.  You heard about factoring, but know you are not informed enough to make sure you are getting the best deal.  Maybe you ARE informed enough, tried to factor, and did not get the best deal.  Ta-Da:  THAT IS WHY FACTOR BID WAS CREATED!

In this blog, let’s go over some key terms you will hear and what questions you should ask when choosing a factor that is right for your company.

Keep in mind that factoring your open accounts receivable invoices for immediate cash is much different that going to a bank for a loan.  Factoring is NOT a loan, you won’t be dealing with a bank.  As there are many different types of business financing, so there are many different factors financiers that serve a wide variety of needs with a wide variety of terms.  Not to worry, factor bid has you covered. We make it easy to find the best factor for your business needs. Our database of factor finance companies is the best in the world. Our software matches your business with the top factor finance companies in your specific industry, so you get the best offers and the factors with the most experience and knowledge in servicing your industry.

Let’s Start

Key Terms To Watch For

  • Accounts Receivable Invoice (A/R):  An invoice provided to a client stating that goods and/or services have been provided and payment is to be made in a particular time frame.  In the case of factoring, the accounts receivable invoice is also an asset that can be leveraged/sold for money.  A/R is found on the balance sheet and is an asset because it is to be paid within 90 days or less.
  • Advance:  The money that your company receives when your invoice is purchased by a factor.  The amount advanced is usually a percentage of the face value of the accounts receivable invoice.
  • Advance rate:  The percentage or amount of the accounts receivable invoice that will be advanced/paid.
  • Concentration:  The percentage in which a factor will fund a single customer you have.  
  • Confidential factoring:  Your customer is not informed that you are factoring their account / invoices.
  • Credit limit:  This financial limit is placed on your customers and is based on their credit rating.
  • Debtor:  The person or entity that owes payment on the open accounts receivable invoice, usually referred to as (your customer).
  • Factoring:  A Business that sells their accounts receivable invoices to a third party (called a factor) at a discount of the gross amount of the invoice face value; for immediate cash.
  • Factoring charge:  A charge for taking over the administration, collection, and processing of the accounts receivable invoices, usually by your factor finance partner.  
  • Factor fee:  The fee a factor charges in order to finance your accounts receivable invoices.
  • Factor financier:  The financial entity who purchases accounts receivable invoices at a discounted rate.
  • Funding limit:  The maximum amount of funding a factor finance company will pay you.
  • Funding period:  This is the period in time where the factor purchased the invoice and when your customer pays in full.
  • Non-recourse:  This is the sale of the asset (outstanding accounts receivable invoice).  The factor assumes ownership of the receivable and the risk of collecting the debt.
  • Notice of Assignment:  A notice that your customer (the debtor) receives stating that their invoice has been factored.  This notice also provides the customer with the new payment address and/or process. “Chances are, if your customers pays slow, their already being factored by their other vendors, thus eliminating any fuss over you wanting to factor their slow-paying invoices.” 
  • Reserve:  A certain amount of funds that is set aside by the factor to cover bad debt expenses and payment shortages. (ie., kind of like an escrow account)
  • Seller (Transferor):  The one who owns the open accounts receivable invoice, but relinquishes ownership by selling it to a Factor.
  • With recourse:  The factor has the right to collect unpaid payments from the seller, in the event the debtor (your customers) does not make good on the payment / invoice.

 

Questions To Ask When Choosing A Factor That Best Fits Your Business

  1. Do you provide non-recourse factoring?  If so, what is the difference in the rate?
  2. What is the length of the contract?  Factors will typically want to partner with you for 12-24 months to have the opportunity to purchase more open accounts receivable invoices. This will also help them understand how your business operates so they can help you increase your profits and become more successful. 
  3. How fast can I expect to receive payment?
  4. Can my payments be deposited into my checking account, same or next day?
  5. What is your discount rate?
  6. What is your fee for late charges?
  7. Do you help us collect payment from late/no pay debtors?  How?
  8. Can I stop factoring any time I want?
  9. Is there a penalty to stop factoring?
  10. What if I want to factor with another company?  Is that OK?
  11. If I refer a friend’s business, do I receive a referral reward?

-Finally

We’re sure you’ll have other important questions that specifically affect your business. Here is a good tip, write down all your questions (preferably in an email) and send them to each factor that provides you a competitive offers; after submitting your invoices using factor bid on your desktop or download Factor App for your smartphone.

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Discovering business capital that is right in front of you, is comparable to winning the lottery..

Discover business capital that is tied up in your outstanding open accounts receivable invoices. Don’t become the financier of your customers, you delivered goods/services now it’s time to get paid. Don’t wait 30,45 or even 90 days to be paid, Get Cash Today!

Why is your CASH worth more TODAY than tomorrow?

CONGRATULATIONS!!!  You just won the lottery!  You begin planning how you are going to pay off debt, buy a new home, give money to the family, go on vacation, maybe give to a charity.  The lottery gives you two payment options:  Receive $1,000,000 now or $1,000,000 over the course of five years.  What pay-out are you going to chose?

Most everyone is going to want their $1,000,000 up front.  Why is it better to have the money now, rather than later?  Any hard working business owner will tell you, waiting for the check to arrive adds unwanted stress to our business. We didn’t sign up to be the financial arm of our customers, while they use our money to make more money. Let’s look at the TIME VALUE OF MONEY!

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What is the Time Value of Money

A $10 dollar bill is the same today as a $10 dollar bill five years from now.  However, if you have $10 now you can begin earning interest on that $10.  All of a sudden, your $10 is worth $11 five year from now.  This might not seem like a big deal in the case of $10, but it is when you are a business dealing with thousands or hundreds of thousands of dollars — It is a VERY BIG DEAL!

It becomes an even a bigger deal when the $10 dollars you’re suppose to have today, ends up arriving 60 days after it’s suppose to, or worse off, never arrives at all! Liability plays a key roll in important business decision, especially when your money is involved.

So what can you do to ensure you’re being paid sooner for the job you’ve already delivered.

Many industries use invoicing as a method of payment for services rendered or products purchased.  Payment can take as little as 30 days to receive or as long as 120 days. Someone in the trucking industry, for example, might receive payment in 30 days for their services or in 45 days if the customer is slow pay.  In the case of the healthcare industry, healthcare professionals have to wait for both the insurance company to pay a percentage of the bill followed by the client to pay off the remaining balance.  That is a lot of paperwork and a huge amount of time tied up in waiting for payment.

So what you can do is “unlock” the cash that’s being trapped within your outstanding accounts receivable invoices.

How?

Visit https://factor.bid and we will show you how easy it is to unlock cash that is sitting in your open accounts receivable invoices.  Simply upload your invoice, or snap a picture using our finance app called Factor App, and within minutes factor finance companies will be competing to buy your A/R Invoices for immediate cash.  Isn’t it nice to have someone competing for your business for a change, while you are out competing for everyone else’s?  

The best part about getting your business set up with a factor finance company (that buys your invoices and gets you paid within 24 hours) is the simple fact that you’re no longer going to be the bank. Let someone else finance your customers, so you can get your money upfront and use it to grow your own business faster.

If you’re making money, so is your factor finance partner. Factors want to see you grow your business faster and make more money. They’re ready and able with their years of experience and back office assistance to turn your small business into a thriving, competitive juggernaut within your industry.

Check out Factor bid to get a few offers from the top factor finance companies within your industry, and get paid as soon as today for your outstanding accounts receivable invoices (A/R Invoices)

Factor Financing in an App – Factor App – Download for your Smartphones

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