Factoring is a process that helps businesses of all sizes solve cash flow problems without taking out a business loan. The factoring company pays a certain percentage of the business invoices in one lump sum. Rates typically range from eighty to ninety percent. The business gets the cash fast, and the company collects one-hundred percent of the face value of those invoices. The difference is taken as the fee so there are no out-of-pocket expenses for the business. The practice eliminates the need to wait for outstanding invoices to be paid by the customer, thus increasing cash flow for the business.
Most factoring companies provide services for all sized businesses. The paperwork and protocols are geared for dealing with large businesses that have support staff who can be assigned those duties. A business of one or a few staff members may have trouble complying with factoring requirements. Minimum numbers of invoices each month often apply, which eliminates a substantial number of small businesses that experience fluctuations in invoice numbers. A conventional factoring company may not be suitable for small businesses. There are factoring companies that specialize in small businesses and organizations. Those are ideal for start-up businesses, freelance professionals, consultants, small local businesses, and small non-profit organizations.
The key differences include less formal protocols, reduced minimum amounts of monthly invoice totals, and minimal fee structures. Paperwork and processes are simple and can be accomplished by one person on a regular basis. Companies that specialize in small business factoring help businesses that generate less than thirty-thousand dollars in invoices each month. If a factoring company does have a minimum requirement for the number of invoices processed each month, it is much lower than a conventional factoring company. Compare small business factoring companies to determine which one is right for the business. Gather information regarding the setup charges, percentages, and procedures of a few different companies and read it today before deciding. Also, find out if the factoring company has experience in the specific industry of the business. That is important because it indicates the company is familiar with the intricacies of the industry and understands some of the challenges facing the business.