What Is Invoice or Factoring Finance?

Invoice or factoring finance is one of the currently popular ways in which a company can raise cash quickly. Traditionally, a company can only do so in two basic ways: either it has to secure a loan (usually from a bank), or it has to sell off some of its assets quickly (and often at a loss). Invoice finance is comparatively new, but it does have a resemblance to both these forms of financing.

A Basic Definition of Invoice Finance

Invoice finance or factoring involves the use of invoices or accounts receivables as an actual asset of the company. The invoices can be used as a means of collateral to get the money right away, or it can be "sold" for a percentage of its actual future value. For example, if your invoices total $50 thousand, then you can sell it for 90% percent of its value (the actual percentage depends on the agreement you have with the factoring company) so that you can get the money immediately instead of having to wait 30 or even 90 days for the account to be paid in full.

How It Works

It's a very simple procedure in essence, although it may have a lot of variations depending on the details of your agreement with your factoring serviced company. A standard method goes like this:

You provide a service or a product to a customer, and as a result you invoice them. The customer is then required to pay you within a specified number of days, such as 60 days. Because you don't want to wait that long, you have entered into an agreement with a factoring company. Now you send the details of the invoice to that factoring company. You then receive money based upon the total amount owed to you and the agreed upon percentage of the amount. If the amount is $10k and the percentage is 90%, then you get $9k immediately. Some companies can get you the money within a day or two, while others may require a full week or even more. Who carries out the invoice collection may also depend on the agreement you have with the factoring company. You may want to do it yourself so that you are sure you can maintain amiable relationships with your customers. You may also want to allow the factoring company to provide this service for you because you are then no longer required to find employees to do this task. Once the 60-day period is over and the customer has paid in full, then you may receive the rest (the $1000) except that from this amount there will be some deductions the factoring company will take as its fee. The Advantages of Invoice Finance

So if you need to get a bundle of cash quickly, invoice finance may be your best solution. Entering into an agreement with a factoring company is more likely than getting a loan, the amount may be more than what you can get from a bank, and you get the money more quickly.

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Neebo Capital factoring company is located in Boca Raton, Florida we serve a WORLDWIDE client base of wholesalers, distributors, staffing services, manufacturers , technology services, service providers, professional and other companies. visit our site here www.neebocapital.com

Posted on 2013-07-28, By: Chris Lanchech *

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Note: The content of this article solely conveys the opinion of its author, Chris Lanchech