As a business owner, you have many monthly recurring expenses of which the most important expenses might be salaries, rent, and supplies. In order to pay for these expenses, you will need money; however, you might be facing a situation in which most of your invoices are paid in sixty days by your clients. This poses a situation in which you might not have sufficient funds to pay your monthly bills.
In such cases, it might be advisable to consider invoice factoring . Invoice factoring is a form of financing that is quite different from all other types of financing. It is in no way a loan. Instead, it is the sale of your invoices. You can sell your invoices for immediate cash. Instead of waiting for sixty days for your invoices to be paid, they can be paid within a few days thus generating the cash flow that you need to pay your expenses.
A factoring company is the company to which you will be selling your invoices. This company will normally pay you in two installments. The first payment will be made immediately or in a few days while the second payment is made when the actual payment for the invoice is made by your clients. The first payment is known as an advance payment and the second payment is known as a rebate.
The factoring process is as follows: the goods or services are delivered by you to your client or customer, the invoice is submitted to the client or customer for payment and is then sold to the factoring company, the factoring company pays an advance which is normally above seventy percent of the total value of the invoice, the money received from the factoring company is available for immediate use in your company, and finally, the payment by the customer is made to the factoring company who then pays the balance that it owes you.
If you cannot wait on payment from your customers or clients, invoice factoring is the solution for you. It is easy to obtain and to set up and gives you immediate access to your money.
