Factoring Companies: What is Factoring and How Can it Help your Business?

Every business needs access to cash. While maintaining sufficient cash flow can be difficult, successful businesses require it for ongoing operations and to fund growth opportunities.

What is Factoring?

Factoring is a way that businesses which ordinarily have to wait 30 to 60 days to receive payment from a customer can turn their accounts receivable into instant cash. It’s sometimes called “invoice factoring,” “accounts receivable factoring,” or “accounts receivable financing.”

Factoring Companies

Factoring companies purchase your invoices and advance you money within 24 hours. The advance rate varies by industry, your customer’s credit histories and few other criteria. Factoring companies consider your customer’s ability to pay, not yours. The biggest attraction to factoring is not being held captive by slow-paying customers. Accounts Receivable Factoring lets you turn your invoices into cash that can immediately be used to meet payroll and fund growth.

How to Choose your Factoring Company

Not all factoring companies are created equal. Some factoring companies rely on financing from outside sources. These factoring companies do not have access to their own pool of cash and must partner with a bank and pay them for access to their capital. Then there are factoring companies which are integrated within banks. These types of factoring companies are direct lenders and do not have to rely on financing from other sources. These bank-backed factoring companies offer a wider variety of customer solutions and more funding capacity than traditional, non-bank-affiliated factoring companies. Bank-backed factoring companies also enjoy a lower cost of funds than the majority of their competitors. This lower cost is passed on to their clients in the form of lower fees. As a result, bank-backed factoring companies offer the most competitive rates in the industry.

Getting Started

Hopefully this overview of how factoring works has been beneficial and you’re starting to feel like you’re getting a handle on it. If you are tired of waiting 30 to 60 days for your customers to pay, then fill out the Gulf Coast Business Credit Quick Quote and one of our team members will contact you immediately. We can help you increase your cash flow and accomplish all of the goals that you have set for your small business. Plus, Gulf Coast Business Credit is a bank-backed factoring company, so we can offer the most competitive rates in the industry.

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