Let’s take a look beyond the basics, and consider the details. The term ‘invoice factoring’ can initially be confusing, as can the process involved. We would like to guide you through the answers to some of the most frequently asked questions and help clarify the concept.
Prefer to talk to a real person? Our friendly factoring consultants are on hand to answer any of your queries, and personally explain the factoring process to you. Call us at (888) 229-9993 and let’s chat.
Is invoice factoring really a useful financing tool?
Selling accounts receivable (invoices) to a factor in return for immediate working capital has become a popular financing tool for companies both large and small. Businesses improve cash flow without having to add a burden of debt. It is a proven, and widely accepted way of financing operational expenses and helping with company growth.
What do factoring companies do?
Factoring companies purchase your current outstanding invoices for goods and services that have been delivered to your customers. Factors verify the invoices to confirm their validity and check there are no issues that may interfere with payment. Cash is then advanced to you up to 30-60+ days prior to invoice payment from your customer.
What is the difference between recourse and non-recourse factoring?
When an invoice is factored on a non-recourse basis, the factor takes the credit risk of the customer, thereby protecting the client from credit loss. When an invoice is factored with recourse, it means that the client is ultimately responsible for payment if the customer does not pay.
What types of businesses benefit from invoice factoring?
Businesses with healthy accounts receivable looking to increase working capital in as little as 24 hours, rather than having to wait 30-60+ days or more for collection. Funds can be used to cover a multitude of expenses such as operating costs, expansion costs, and supplier discounts.
How is invoice factoring different from a bank loan?
The biggest difference is that invoice factoring is not considered to be a loan; it is the purchase of your accounts receivable. As such, factors are concerned about the creditworthiness of your customers when making a decision. A bank decides whether to offer a loan based on your company’s credit history, collateral and cash flow. Factors can fund quickly, often within days of receiving an application; banks usually take much longer. There is no loan, no interest, no principal to pay down.
Can my business still qualify for factoring with a bad credit history?
The credit history of your business is not a major consideration for factoring companies simply because your invoices are used as collateral. Funding decisions are based upon the credit-worthiness of your customers and their history of prompt and regular invoice payment. The answer is yes, your business is likely to still able to qualify for factoring with bad, little, or no credit history.
Can I factor if I have liens on my accounts receivable?
It is possible, but vital that you let your invoice factoring company know during initial conversations. The process begins with your potential factor asking the bank to subordinate the lien in their favor. In many occurrences the bank will accommodate the request. Another great example is having IRS liens on your business. It is still imperative to disclose this information from the outset.
How much does factoring cost, and is it worth the cost?
The rate is dependent upon many variables, such as sales volume, invoice size, accounts receivable turnover, and creditworthiness of your customers. At Bay View Funding, customers can receive rates as low as 0.5%*, and funding up to $15 million.
*rates subject to change
What is the difference between invoice factoring and merchant cash advance?
Unlike invoice factoring, merchant cash advances are based on future credit card receipts rather than against invoices. Sales are projected and have not yet taken place. Premiums are higher than with invoice financing.
How does freight bill factoring help trucking companies?
Freight bill factoring pays you money now for freight bills that your customers are not due to pay for 30-60+ days. This helps maintain a constant flow of cash to keep your company moving.
How does financing for the oil and gas industry work?
Factoring your outstanding invoices can provide your oil and gas company with cash now on accounts receivable not due to be paid for up to 60+ days. This type of financing provides working capital to purchase equipment, hire crew, and keep your production at capacity without incurring debt.
How does payroll funding benefit staffing companies?
Payroll factoring supplies you with the working capital you need to attract and retain great talent. Access to early funds means making payroll on time.
How does Bay View Funding help with invoice management?
Bay View Funding becomes your accounts receivable department for all invoices you choose to factor. This involves invoice collection, reminder calls, and customer credit monitoring and management. We also provide a secure customer portal allowing you to track and monitor your invoices at your convenience.
Does Bay View Funding have a factoring broker program?
Bay View Funding is excited to work with a number of factoring brokers to solve cash flow challenges.
Will Bay View Funding contact my customers?
The invoice factoring process requires Bay View Funding to contact your customers in order to collect on the invoices. However, our success is tied to yours and we want you to be successful! Our courteous and professional staff has an unparalleled commitment to maintaining excellent relationships with your customers.
Where is Bay View Funding located?
224 Airport Parkway, Suite 200, San Jose, CA 95110
The process is fast and efficient: Our goal is to process your request to factor as quickly and simply as possible.