Services
Invoice Factoring
Invoice Generation
The business sells goods or services to its customers and generates invoices with payment terms, typically having 30 days cycle, 60 days cycle, or 90 days cycle.
Factoring Agreement
The business enters into a factoring agreement with a factor, which outlines the terms and conditions of the arrangement, including the discount rate, advance rate, and fees.
Submission of Invoices
The business submits its invoices to the factor for verification and approval. The factor conducts due diligence on the invoices and the creditworthiness of the business’s customers.
Advancement of Funds
Once approved, the factor advances a percentage of the invoice value to the business, usually within 24 to 48 hours. The advance rate typically ranges from 70% to 90% of the invoice amount.
Collection of Payments
The factor takes over the responsibility of collecting payments from the business’s customers. When the customer pays the invoice, they remit the payment directly to the factor.
Settlement
Once the factor receives the full payment from the customer, they deduct their fees, including the discount rate and any other applicable charges, and remit the remaining balance to the business, minus the reserve amount.
Invoice factoring offers several benefits to businesses, including improved cash flow, faster access to working capital, reduced administrative burden, and mitigated risk of bad debt. It is particularly suitable for businesses with long payment cycles, seasonal fluctuations, or growth opportunities requiring immediate liquidity. However, businesses should carefully consider the costs and implications of invoice factoring, including the discount rate and impact on customer relationships, before deciding to pursue this financing option.
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