When clients pay you after you deliver a product or service, your small business may feel a pinch. Government agencies and large companies tend to delay their payments to bolster their accounts. As a result, small businesses are affected. According to an article in the National Federation of Independent Business by Wall Street Journal, this is a trend that has persisted since the recovery from the world’s economic crisis.
Your business can fail to meet its daily expenses if clients delay payments. What’s more, your business can fail to meet its payroll obligations due to lack of cash (in worst case scenarios). When your business is experiencing setbacks due to outstanding invoices, it’s time to opt for an invoice factoring service as a viable solution.
So, what’s invoice factoring?
Buying of unpaid invoices by a third-party company (like Carter Funding) for a share of the totals due is know as invoice factoring. Normally, invoices are paid at an advance rate of up to 90%. It is a form of debt finance and financial transaction. A third party, known as a factor, buys your invoices (accounts receivable) at an agreed upon discount.
Factoring helps meet your immediate need for cash when your invoice payments are due in 30, 60 or even 90 days. Payments are made in two installments by the funding company. It’s also known as accounts receivable financing and debt factoring.
Types of Business That Use Invoice Funding
Invoice factoring is used by businesses big and small. Invoices should be due in 30, 60 or 90 days. Your customers must be creditworthy such as those of business-to-government (B2G) and business-to-business (B2B) organizations.
Examples of businesses who benefit from accounts receivable funding include:
How Invoice Funding Works
A typical factoring process involves you, the small business owner, making an invoice submission to a factor (like Carter Funding). The factor responds by giving you an advance rate. Your client makes payments to the factor within 30, 60 or even 90 days; this depends on the invoice terms and conditions. Finally, the factor pays your balance after subtracting fees.
- A small business owner (you) whose company is experiencing a need for immediate cash sells its invoice to a company offering factoring. In exchange, you receive cash up front from the factoring firm, which is less by a reserve amount.
- When your client makes the payment, the amount due is paid to the invoice factoring company instead of your business.
- Once your customers clear their balances, you’re paid the reserve amounts by the factoring company. The service fee agreed upon, at the time of invoice financing, is also deducted by the invoice factoring company.
Your small business can enjoy consistent, positive cash flow by taking advantage of invoice factoring in Memphis. This means that you can run your business normally even when your invoice payments are yet to be made.
Unlike higher-cost cash flow loans, bank loans or even merchant cash advances, which also take so much time to process, invoice funding is your ideal solution to customer payments.
4 Factors to Consider When Selecting a Company Offering Invoice Factoring in Memphis
When invoice factoring is the right short-term solution for your business, various factors need to be considered when selecting the right factoring firm. Here are some things to look out for:
- Hidden Fees – look out for hidden fees. Doing some research up front should help you find out whether a firm has hidden fees or not. If you’re not careful, bank transfer fees, cancellation charges and origination fees can easily balloon up and consume a good chunk of your payments. Ask the right questions and how these charges can affect your due payments.
- Restrictive Contracts – as a small business owner, you don’t need restrictive, long-term contracts that require you to submit a specific number of invoices over a pre-determined period. Nor do you need contracts that come with heavy restrictions. Opt for a company with few to no restrictions.
- Advance Rates – Carter funding offers up to a 90% invoice value in advance. Note that when your customer finally makes payments, you’re given the balance minus fees.
- Penalties – avoid penalties at all costs. Find out if your factor has hidden penalties and what triggers them for avoidance. Overlook companies with insensible and unfair penalties.
Take your time to find the right invoice funding partner that doesn’t just understand your business needs, but can fulfill them.
Contact Carter Funding today for your invoice factoring needs.
With us, you can apply online and we’ll answer your cash flow needs within 24 hours. CFC is a premier online factoring service provider. We have BBB A+ rating and have helped hundreds of thousands of entrepreneurs on the road to business success. Allow us to help you too. Apply now and get ready to take your business to the next level.