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Invoice Factoring: How does it work? -
Cash Flow Financing Without Debt

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From Invoicing to Collection

Frequently Asked Questions Concerning Invoice Factoring

complete guide to invoice factoring

What is invoice factoring?

In an invoice factoring transaction a business sells some or all of its outstanding receivables to a factoring company to get almost immediate cash advances. Invoice factoring is commonly used by businesses that sell products or services to other businesses on terms to cover temporary funding needs.

How does invoice factoring work?

The invoice factoring process is simple
We will purchase your valid invoices for completed work and provide you with an immediate cash advance against those invoices. When your customer pays you will receive the balance minus our fees.

Example: A customer makes an agreement with a factoring company. The advance rate for this example is 85% and the factoring discount (fees) 1% every 30 days.

The customer sells a $1000 invoice to the factor and receives $850 as soon as the invoice purchase is approved.

When the invoice is collected, let's say after 30 days, the factoring company wires the customer $1000 minus $850 (advance already deposited) minus $10 ( factoring fees). It's that simple!

Do I bill my customers as I usually do?

Yes, with the exception that you list a different address to which your customer sends their payment.

Do I have to factor all my invoices? Are there minimums or maximums?

No. One of the more attractive benefits of factoring is you can pick and choose which invoices you factor. This allows you to control the costs of factoring and maintain the cash flow you desire. For example, you might choose to factor a particularly large job to get access to that cash quickly while letting several smaller ones pay in a normal cycle.
While there are no minimums or maximums, you can lower your total costs with a higher volume of factoring.

How much of the total invoice can I expect as an advance?

A number of items will determine the amount you will receive, but it will range from 75 percent to 95 percent of the total invoice. Some of the things determining the amount include your customer terms, past experience, industry, and perceived risk factors.

Here's more detailed information about factoring advance.

What does factoring cost?

As with the last question, your invoice factoring rates will vary based on a number of variables. However, you can expect a total monthly fee of 1 percent to 3 percent. Many companies actually build this cost into their bids or prices.

You can learn more about factoring rates here.

How do I receive my advance and how quickly?

invoice factoring video

You will receive your funds by bank wire straight into your designated account. Your funding schedule will depend on your particular arrangement, but funds can be wired within 24 hours or less of invoice submission and approval.

If I only get part of my invoice as an advance, when do I get the balance?

When your customer pays the invoice, you will automatically receive any balance after the factoring fees are deducted. Depending on your specific agreement, you may have an account reserve that serves as a totally amount held and receive more of less of the balance on the invoice.

How does my credit rating affect my ability to access factoring services?

In addition to helping greatly with cash flow, many companies find this one of the biggest advantages of factoring invoices. Decisions to factor are based on the credit rating of the customer, not your company. One important function of most factors is to help you evaluate that customer’s credit before you start work so you better understand the risk they represent.

I need help with next week’s payroll. How quickly can I start factoring invoices?

Once your application is submitted, which usually only takes an hour or so, you can be approved within 24 hours. Once approved, your first funding could be within 24 to 72 hours.

Here's step-by-step information about the factoring application and approval process.

Do you factor businesses with troubled past, with bank credit maxed out or denied, or with insufficient credit history?

Yes, we do! As a matter of fact our typical clients have one or more of the following characteristics:

  • Rapid Growth
  • Poor Personal Credit
  • Operating Losses
  • Start-ups
  • Negative Net Worth
  • Delinquent Taxes
  • Highly Leveraged
  • Prior Bankruptcies
  • Forbearance

What industries does you factoring company serve?

If your business serves B2B customers you can access our factoring services . We have significant experience in a wide variety of industries included, but not limited to, the following sectors:

We invite you to check out our factoring company reviews submitted by clients in your industry.

I’ve got the basics. How do I learn more and get started?

invoice factoring video

We are all about transparency. Here you can also find detailed information to learn to compare factoring proposals from factoring companies.

If you want to find valuable reasons to choose Gateway as your factoring partner you are invited to watch the video on the right about our confidential factoring services or visit this complete page detailing the exclusive benefits our full service factor provides.

Whenever you are ready to begin factoring please fill-up a simple factoring quote form or call us at 1-855-424-2955 to talk to a decision maker. We’ll respond promptly to any of your questions and immediately start processing your application.

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