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What is Factoring?

Each and every day we hear from business owners around the country simply asking: What is Factoring?

In this context they are asking about Invoice Factoring (or Factoring Accounts Receivable) and once explained business owners of all sizes fall in love with the concept. You see Factoring Accounts Receivable is simply the quickest and easiest (and sometimes the only) way to immediately solve your cash flow issues. So let's start with the basics:

Factoring is a financial transaction whereby a business sells its accounts receivable invoices to a third party at a discount. The third party is called a Factor and the transaction is simple- you submit an invoice for factoring and the factor immediately advances 80% of the invoice amount (usually in the form of a bank wire or check). The factor eventually receives payment from your customer and at that time deducts their fee and wires you the balance of the 20% that was being withheld. Now imagine this process of Factoring Accounts Receivable is performed on many (or all) of the invoices that your company produces and not only have you increased your cash flow but you have compressed your sales cycle.

The great part about Invoice Factoring is that the emphasis is always on the value and credit worthiness of your company's accounts receivables. In contrast when seeking a bank loan your bank will focus on your company's profitability and the value of the non-accounts receivable collateral such as equipment, and real estate. A bank loan is for a fixed amount, whereas a factoring line is designed to grow with your business. Bank loans can be extremely difficult to secure and take a lot of time to process, whereas a factoring line is comparatively easy to secure and very quick to setup.

FACTOR KING® was established with a few simple goals in mind- combine "Old World Factoring" with "New Age Thinking". Our Mission to provide crucial funding to small and middle tier companies that may or may not have access to adequate bank financing is responsible for our success. Through our leverage of various technologies our systems and procedures provides fast and accurate factoring, simple order processing, and ease of use allowing our clients to focus on building their core business. Client growth is how we measure our own success. Become part of FACTOR KING® today!!

 

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