Invoice factoring is a finance solution to improve cash-flow where a business sells the receivable to the factoring company at a discount in exchange for immediate working capital. The factoring company then collects payment directly from your customer.
When you “sell” your accounts receivable to a factoring company, the process work like this:
- You provide goods or services to your customer
- You send in the invoice and appropriate documentation to the factoring company
- The factoring company pays you the agreed upon advance percentage from the total invoice
- Your customer pays the factoring company the invoiced amount
- The factoring company will pay you any remaining amount left over minus the factor fee
The factoring fee can range between 1% to 5% depending on the specific industry, risk, volume, and how long the invoice takes to pay.
Almost any type of business-to-business company can be factored. A few examples are trucking, manufacturing, staffing, and service industries. The specific details of the transaction make it likely or less likely to be a factorable opportunity.
The quick answer is no. This is a cash flow method that has been around for centuries. Often times, customers see your company partnering with a factoring company as a growing opportunity. A business/factoring company partnership can allow the customer to see the strength in your business as the factoring company thought your business was solid and not a lending risk.
Once you fill out an application, we can assess the best program parameters for your business.
The preliminary approval and setup process typically takes 24 – 48 hours. Steelhead Finance makes every effort to setup and fund the account as quickly as possible.
We have a variety of funding options to fit the needs of your business. An expedited wire will get you funds the same day based on funding deadlines.
Factor advances will vary and can range between 70% and 97%.
Steelhead Finance offers a variety of funding options that include a bank wire, ACH, fuel card transfer, and money code.
Recourse factoring is more common and is structured where your company will buy back the invoice if the factoring company is unable to collect payment. Non-recourse factoring means the factoring company assumes most of the risk on the customers associated with that program. There are usually stipulations that go along with non-recourse programs in order to comply.
Your credit history does not typically affect your ability to factor. Factoring decisions are based on the credit history of your customers since they are the ones responsible for payment of the invoices.
No. Your primary factoring company will need a first position UCC. This means that they have legal rights to collect payment from your customers after they advance you the funds from your accounts receivable.