The second installment covers the remaining balance of the invoice amount after the customer pays and the factoring company takes their fee. The first is an advance of 70-90% of your invoice. Most factoring companies pay in two installments. Your clients still get their usual 30-90 day financing terms, but they pay the factoring company directly. ![]() Instead, a third-party factoring company steps in to pay you the invoiced amount you’re owed, minus their fees. Invoice factoring gives you money in hand like a loan, but the money is yours to begin with. One solution to a cash flow crunch is to turn to invoice factoring. Knowing your options will help you make an informed choice. We’ll also discuss alternatives like invoice acceleration. Invoice factoring is a simple way to get the cash you need to buy equipment, cover your bills, or keep those doors open - fast.īefore adding this solution to your small business financial strategy, let’s look at the essentials you should know. ![]() A delay in payment from an overdue invoice has a domino effect that could impact your working capital for months. In order to compete with the mega-chains, entrepreneurs often turn to using a billing system that involves invoicing.Īs a small business, you rely on a steady cash flow to keep your overhead covered. With hundreds of thousands of new startups opening their proverbial doors every year, businesses like yours are essential to the supply chain. It’s the small businesses that make the world go ‘round.
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