Working Capital

Factoring Receivables: A How-To Guide

Factoring Receivables: A How-To Guide

As a business owner, there’s only so long you can suffer the indignity of customers refusing to pay on time. There’s a point to which you can be friendly. Beyond that, it’s time to start getting real. You need money. Despite how desperately you need extra cash, you don’t want to upset your business partners. You still need their orders. That’s where invoice factoring comes in.

By factoring receivables, you can find the cash your company needs without having to upset the applecart with your clients. Invoice factoring can be incredibly helpful. This is particularly true for businesses that find themselves stuck in the middle of a cash flow gap. But how are you factoring receivables, and are you doing it right? Here’s how you can factor your receivables properly and get the cash your company requires.

Why Should I Factor My Receivables?

If you read our definitive guide to accounts receivable factoring, you should already have a clear understanding of everything. Just in case you didn’t, we’re happy to give you a brief recap on what you need to know.

The first step to factoring your receivables is understanding what it is and why you’re doing it. Most businesses look to accounts receivable factoring due to difficulty getting their customers to pay promptly. Net terms can be an attractive way to secure a big order from a client. Once you’ve completed that big order and spent cash on inventory and shipping, it becomes a different story.

This story is all too common for many small businesses. Net terms can easily put companies that are doing good business in financial straits. This can do more than upset your bottom line. It can mean not being able to fund your next order, make payroll, and worse. What do you do?

By the time most businesses realize they need additional capital, it’s too late to get a loan. Bank loans are difficult to qualify for and have an application and approval process that can take months. Accounts receivable factoring is a quick and effective way for businesses to secure the working capital they need. Funds can often be received in as little as 24 hours, and small businesses don’t have to worry about it affecting their credit score.

This all sounds great, but it’s important to understand what you need for accounts receivable factoring and if it’s right for you.

Am I Factoring Receivables the Right Way?

Is your business is finding itself strapped for cash as a result of one-sided net terms? In that case, invoice factoring can be your best option for getting things back on track. The good news is that factoring receivables is easier than ever. Thanks to the rise of the internet and the prevalence of online banking, working capital is only a click away.

Proprietary online invoice factoring platforms streamline the process of applying, getting approval, and getting funded. The first part is creating an account with your preferred factoring partner. The right partner will offer you a fair price for factoring and work with you to provide the best service and guide you through the process. Creating an account should be free and require no obligations or added fees for the privilege of doing business with you.

No Credit? No Problem!

It’s a line that sounds like something from a used car lot, but it’s also one of the advantages of factoring receivables. Because you’re getting paid based on existing invoices for which you’ve already provided goods or services, your credit score isn’t, and shouldn’t, be relevant to the process. 

Plenty of businesses, especially those in their startup phase, often don’t have the business history and credit scores necessary to qualify for bank loans. Invoice factoring allows your business to be advanced capital based on business sales, not your credit history. What’s more, a personal credit check is never required, so you should never have to worry about invoice factoring affecting your credit score.

Gather Your Invoices and Get Funded!

Once you’ve set up your account, the rest is a matter of uploading your invoices and saying, “Money, please!” The entire setup process can be completed from start to finish in as little as three days. An average setup process is about a week. Once this is done, you’re ready to get paid.

After you’ve completed your setup, it’s just a matter of clicking the button. After you’ve requested your funds, money can be deposited your account in as little as one day. This is all a far cry from the hassles and time it takes to be approved for a commercial bank loan or through the Small Business Administration (SBA).

How to Factor Receivables

To summarize, these are the steps you need to take to factor receivables the right way and get paid fast.

  1. Collect all of your outstanding invoices
  2. Create your account online
  3. Upload your invoices
  4. Get approved
  5. Get funded

It’s that simple. If you’re tired of waiting around to get paid while your clients are sitting pretty, it’s time to turn things around. By factoring receivables, you can get paid for your invoices now. Set up your account and talk to someone to see how you can get paid today.

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