Frequently Asked Questions
If you are considering factoring receivables to improve your cash flow, you may have some questions about how the process works. At Accounts Receivable Cash we believe that an informed client is a happy client, so we’ve compiled a list of the most frequently asked questions about accounts receivable factoring.
What is accounts receivable factoring?
Factoring receivables is an alternative financing method in which you sell your open receivables to an accounts receivable factoring company. The factor advances you cash against those invoices, and your customers pay the factor back.
How do I factor my receivables?
The process of factoring receivables is easy:
- Request a quote and complete an application.
- Get approved.
- Send the receivables factoring company copies of your invoices for products or services provided.
- The factor will deposit 70-95% of the invoice value into your bank account on file within 24-hours of invoice verification.
- Your customers pay the factoring company directly
- The factor deposits the remaining value of your invoices, minus their fees.
You can factor your accounts receivable as often as you need, from a large batch of invoices once a month to several small batches throughout a given week.
What can I do with the cash I receive from factoring receivables?
ANYTHING! The factoring company places no strings on the cash you receive; once cash is deposited into your account you can use it wherever your business needs it most. Make payroll and tax deposits; pay your company bills; purchase new supplies or equipment; market to new customers and talent; or invest in growing your company – the choice is yours!
Do I have to pay the factoring company back?
Generally, no – accounts receivable factoring is not a loan, so there is no amount to repay. Some recourse factoring agreements include a clause that would require you to repurchase an invoice if it stays open beyond your agreed-upon recourse period. However, if you choose a non-recourse factoring program, the factoring company would assume the risk if your client fails to pay. Ask your factoring company about both options to determine which is best for your business.
How long does it take to qualify for factoring receivables?
Financing receivables is much quicker thank bank financing. With the proper paperwork, you can be approved for an accounts receivable factoring program in as little as 3-5 business days! The factoring company will guide you through the process and let you know what they need at each step.
How much does receivables factoring cost?
Your rates and fees will vary depending on the factoring company you use. Accounts Receivable Cash’s factoring partners offer rates from 0.69% to 1.59% for 30 days, which are competitive in the industry.
I have poor credit. Can I qualify for accounts receivable factoring?
Yes, yes, yes! Factoring companies approve clients based on the creditworthiness of their debtors rather than on personal or company credit. If your customers pay steadily and are established financially, you can still be approved!
In fact, factoring receivables is a great way to build your company credit. By taking advantage of early pay discounts on invoices and staying current with your other expenses you can restore your company to credit health.
Will an AR factoring company fund start-ups?
Yes! Many of our factoring partners work with companies at all stages of development, and are specially equipped to help start-up companies build their business through accounts receivable factoring. You can begin as long as you are incorporated and have begun working with at least one customer.
Which industries benefit from factoring receivables?
Accounts receivable factoring is a great option for any industry, and Accounts Receivable Cash works with factoring companies that specialize in some of the biggest industries.
Below are just some of the industries we work with:
- Freight brokers
- Oil and gas
Don’t worry if you don’t see your industry listed above. We work with all types of businesses in a wide range of industries. If you need funding for your business, we can help.