What Is A Factoring Company?

There are many organizations out there claiming to help you better run your business. Get-rich-quick schemes and snake oil salesmen are everywhere. Your business is too important to risk with false claims or bad deals. But sometimes, you are in need of increasing your cash flow. You might feel like your only options are selling equipment, letting employees go, or taking out loans. Before you take any of those steps, learn more about what a factoring company can do for you.   

The Factoring Company 4-1-1

First off, we’ll explain what a factoring company is. Factoring is when a business sells its accounts receivable to a third-party factoring company. The factoring company charges a small fee and takes over the payment collection entirely. Businesses often find this useful to meet immediate cash needs. Think of it this way: money tied up in accounts receivables and outstanding invoices is YOUR money, a factoring company just helps you access it quicker.

How does Factoring Work?

Factoring is not a loan, it’s a way to get your money sooner. It starts with contacting a factoring company to see if you qualify and get a quote for their services. Then, you literally sell your selected accounts receivable to them. They pay you 80-90% of the invoice in cash, within five days. The factoring company is then responsible for collecting the payments, you don’t have to worry about it anymore! Once the invoice is paid in full to the factoring company, they give you the remaining 10-20%, keeping a small fee for their service. There are no interest charges, no hidden fees, and no risk. Because it’s your money!

Who Uses Factoring Companies?

Businesses of all sizes benefit from factoring. Small businesses can sell their accounts receivables to free up much-needed capital. They then can use it to fund marketing, payroll, or new equipment during growth periods. There are some industries in general that find it especially beneficial. If a business’s billing cycle differs from its customers, factoring can fill in the gaps. This is perfect for government contractors and business-to-business (B2B) service providers. Staffing businesses and security guard companies can also benefit from payroll factoring for similar reasons.

UC Funding: Intelligent Working Capital

If you think selling your accounts receivable could be a good strategy to grow your business, contact us at United Capital Funding. Our fees tend to be significantly lower than other companies, and we can move quickly. Call us as now at 877.894.8232 to see if you qualify and we can give you an instant quote. You can also contact us online. Let us be a partner helping you to achieve your business goals.