In Canada, 34% of small businesses requested external financing in 2016 (ISED) and in the U.S., a recent survey found that 50% of small business owners had applied for business financing in 2017. What was remarkable about those survey respondents was that by all measures, they were successful and often established businesses; 60% had been in business for five years or more, and 80% had a personal credit score of 650 or above.
Absolutely. Businesses of all sizes use invoice factoring for a number of reasons: to raise working capital, improve cash flow, expand their product or service offerings, purchase equipment, increase the size or quality of their workforce, buy out a partner, and more.
Definitely. Invoice factoring is unique in that owners are not required to jump through the income verification and credit history hoops traditional banks require for loan applications. FundThrough understands that you’re just getting started, so your available funding is based on income you’ve already generated via our integration with your invoicing or bookkeeping software.
Contractors are more susceptible to cash flow issues than most, due to the many working parts of each contract. Invoice factoring helps contractors cover payroll, pay suppliers and invest in equipment while still taking on new jobs, even when client payments may be slow coming in. The ability to collect on your outstanding invoices instantly frees up funds you’ve already earned, so there’s no need to take on new debt or give up equity in order to raise financing for that next project.
Yes, and more construction companies are turning to alternative finance solutions like FundThrough for its ease of use and low financing charges. Typically, construction factoring companies advance only 20 to 30% of your invoice value and keep the rest once they are able to collect. FundThrough is an app that integrates with your bookkeeping software and offers a completely transparent cost structure, with flexible repayment.
Invoice factoring is a popular financing method for forward-thinking staffing companies. Gone are the massive finance charges that traditional factors took when they knew you were desperate to cover gaps in cash flow and waiting for payments. Today, online invoice factoring is used as a proactive cash flow planning and business growth financing solution, thanks to the ease of use and low financing fee (just 0.5% at FundThrough).
For sure, and many do! FundThrough introduced integration with FreshBooks early on, to better serve clients who use the bookkeeping software popular with freelancers and entrepreneurs. Invoice factoring empowers freelancers to take control of their cash flow and stay in good standing with suppliers, subcontractors, and other expenses even when customers are late in making payment.
You can factor any type of invoice. FundThrough works in the background, so customers won’t even know you’re using it. The invoice factoring software integrates seamlessly with your invoicing software, enabling you to receive advances on invoices without any change in the ownership of the invoice itself. You have 12 weeks to pay back the advance and pay a simple, transparent fee that diminishes with early repayment.
Freight invoice factoring is a common way for trucking companies and independent truckers to manage their cash flow. Traditional invoice factors purchase your outstanding invoices and advance you 20% to 30% of the invoice value, then keep the rest as their fee. Next generation invoice factoring like FundThrough, on the other hand, integrates with your invoicing software and advances you the entire value of the invoice. You pay only a 0.5% transaction fee and have 12 weeks for repayment.
There are plenty of factoring companies out there willing to discount your invoices in exchange for advancing 70% to 80% of the outstanding funds. But you have an alternative. FundThrough is an innovative solution that lets you keep more of the money you’ve already earned, while getting access to it as it’s earned.
There are a couple of different ways invoice factoring is classified. The first is based on how you use invoice factoring as a financing tool:
The second way invoice factoring is classified refers to the structure of your agreement with the factor:
We’ll take a look at each of these in detail below.
Factoring with recourse, or recourse factoring, means that you sell your invoice(s) to a factoring company, which then releases an advance payment to you (typically 70-80%). They are responsible for debt collection and release the remainder of the invoice, less their transaction fee, to you once they are able to collect the debt. With recourse factoring, you are responsible for paying back the advance even if the invoice remains unpaid to the factor.
Non-recourse invoice factoring, or factoring without recourse, works in much the same way as factoring with recourse. The key difference is that with non-recourse factoring, the liability of an unpaid invoice transfers to the factor, so you are not responsible for unpaid invoices.
In maturity factoring, you do not receive an advance on the amount invoiced. The invoice factor pays out the invoiced amount less their financing fee on the invoice due date, or some other date you’ve agreed upon in advance.
Invoice discounting means that your invoices are used as collateral for a loan. Invoice discounting companies usually advance only 80% of the value of your invoice(s). You will pay an interest rate above prime, plus a monthly fee to maintain the loan as long as its takes you to pay it back.
When a third-party purchases your invoices and begins debt collection, your clients receive communications from that party. The relationship is then disclosed; it’s evident that you’ve used an invoice factor, as they are either collecting on your behalf or are now the owner of the debt and collecting on their own behalf.
Cross-border factoring simply means that a US company might use a Canadian invoice factor, or vice versa. Online invoice factoring has made it possible for you to choose the best solution for your business’s unique needs, regardless of geography.
Our technology has enabled us to offer clients the best of all worlds: