Invoice Factoring Companies and Invoices Factoring USA

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invoice factoring companies

Invoice Factoring Companies

Even though they have received little credit, invoice factoring companies have played a role in the success of many large companies, including some that are Fortune 500. Invoice factoring companies purchase the accounts receivables of a small or struggling business, effectively serving as "lenders" to that company, although not in a traditional sense. In reality, invoice factoring companies only appear to be lending money to their clients. What they are really doing is trading one asset for another, that is, cash for future cash (A/R).

Invoice Factoring USA and Factoring Companies

As invoice factoring in the USA becomes more popular, it is losing the stigma that had previously put it in the same category as loan-sharking. Perhaps in its early history when factors were usually wealthy individuals rather than regulated groups, invoice factoring might have had many similarities with loan-sharking, including rough treatment for those who didn't pay on time.

Factoring goes by many names, including invoice discounting, receivables factoring, and debtor financing. Regardless of this name variance, however, all invoice factoring companies fulfill the same role. In modern times, this role may include more than just providing companies immediate cash. Many invoice factoring companies serve as credit consultants for their clients as well, giving them advice as to how best to deal with un-paying customers or how to handle international clients. Invoice factoring in the USA often have to think on a global basis more than other companies, and are particularly in need of someone who can help them to expand their business interests worldwide.

Invoice factoring companies often deal with businesses that are in a certain stage of their development. Often, companies that are ready to work with a factor have a solid customer base, if not a huge amount of business. They are growing, and more of their customers are demanding to a credit line. In general, those who do pay on credit are credit-worthy, and pay their invoices on time.

Once a business owner and a factor have agreed to work together, the business owner will decide how many invoices (and the total amount of those invoices) to offer the factor. In turn, the factor will decide how much to offer the company as an advance for those invoices. The advance is usually between 70-90% of the invoice total. The remaining percentage is kept until the invoices are paid, after which time, the invoice factoring company returns the majority of the 10-30% that was held out, keeping as little as .5-1% of the remaining amount as their fee.

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