What is A/R Factoring?
A/R factoring stands for Accounts Receivable Factoring. A/R Factoring is a financial transaction when a business sells its accounts receivable or invoices to a third party commercial funding company to receive an immediate cash payment. The advance can be up to 92% of the invoice amount. Plus, delivery will be as fast as 24 hours.
These are just a few of the advantages of this kind of funding for small businesses. A/R Factoring, AR Funding, Accounts Receivable Factoring, Invoice Factoring, Receivables Factoring, etc. are some of the various names used to describe this type of factoring. When you hear any of these terms, don’t get confused. They all mean the same thing.
Our A/R factoring process involves the following steps:
- Apply for a factoring & credit protection facility
- Confirmation of businesses client’s creditworthiness
- AR funding, AR management & credit protection proposal is provided in less than 24 hours
- Sign the proposal, and closing documents are then sent to the business
- Return the signed closing documents, and a speedy final due diligence is completed
- Credit protection is provided for existing and future clients
- The market continues to deliver their goods or services to their client
- The business forwards their invoices to both the factoring company & your Customers
- Soft-touch AR management kicks in with same-day verification and confirmation
- The factor gives same-day funding with 80-92% of the total invoices
- Our 24-hour online portal is available for the business to see they are factored, paid, unpaid invoices
- The businesses client pays in 30-60 days via ACH or to the Lock Box
- Receive the reserve (remaining 8-20%) minus the factoring fee
A/R Factorings Result: Grow with all cash flow & credit worries gone!
Why is there a need for A/R Factoring in the first place?
The need for AR factoring arises due to the many realities of business funding today. Small business deals with a litany of financial challenges. From slow-paying customers to IRS liens, to being under-banked, to client concentration and many more. Here is a run-down a partial list of reasons why companies leverage AR Factoring for working capital:
- Startup Friendly
- Funding with IRS Tax Issues
- Government Contract AR Financing
- Client Concentration Issues
- Slow Paying Customers
- Solutions for Every Industry
- Non-Recourse Factoring with Credit Protection and a Free Credit Manager!
- Up to 92% Invoice Advance vs. waiting 30-75 Days to receive payment
- Poor Personal or Business Credit
- Less Than 2 Years Business Experience
- Been Losing Money
- Line of Credit That is Too Small for the Business
- An Unexpected Growth Spurt
Is A/R factoring a cost-effective tool to fulfill financial needs?
When comparing funding types, AR factoring is an affordable way to get your company the cash it needs. Do your research and compare MCA or ACH loan rates with AR financing. It is surprising to find the reality of these very high-rate loans when compared to factoring. Bank loans are typically the best rates available, but not many will qualify for a commercial loan. Secondly, a factor offers many services banks do not provide. For example, the Factor provides AR management, helping with accounting work for their clients, credit checks, generating financial reports, and much more. Many companies opt for this financial solution to assist with their company’s success and find AR factoring to be a cost-effective tool.
What are the Additional Benefits of A/R Factoring?
- Factoring provides a quick boost to cash flow, sometimes within 24 hours
- You can customize and manage Factoring so that it provides the necessary capital when a company needs it.
- The financing does not show up on a balance sheet as debt.
- Factoring is based on the quality of a customers’ credit, not a business’s credit or business history.
- Factoring provides a line of credit based on sales, not a business company’s net worth.
- Unlike a conventional loan, factoring has no limit to the amount of financing.