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ALL ABOUT INVOICE FACTORING
What Is Invoice Factoring?
Invoice factoring can be used by small business owners who need fast working capital, by using unpaid customer invoices as collateral. This financial solution is mainly used by small business owners whose customers are other small businesses. Invoice factoring is not a loan, but instead working capital in exchange for a percentage fee upon unpaid invoices. Factoring companies take into consideration invoices with NET 30, 60, 90 and so on terms to determine a set amount value.
Factoring fees also known as discount rate can range anywhere from 1% to 6% depending on the business owner's credit, business credit history, sales volume, and invoice amounts. Invoice factoring lenders tend to offer two types of invoice lending which are known as recourse or non recourse.
Recourse factor is when a customer is liable to payback the receivable or replace the current amount owed by additional or current receivables of equal or greater value to make up for the debt.
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A non-recourse factor is when the customer doesn't have to pay back the unpaid receivables, but instead pays a higher transaction fee to the lender.
Invoice factoring is one of many ways a small business owner can get access to quick working capital and improve cash flow.
Invoice factoring is a great option for businesses looking to fund an opportunity in order to generate more revenue. These type of businesses could use the capital during peak seasons to expand their operating capacity or purchase additional machinery or inventory to drop the overall cost. Businesses that commonly use these types of small business loans include:
Trucking and logistics
Professional service based industries
Retailers, distributors, or suppliers
THE STEER PROMISE
Helping Small Businesses Grow Across The U.S.
At Steer Financial, we understand that no two businesses are alike. We offer financing solutions as unique as the business owners we help. Together, we can help steer your business to its full potential. Step one is determining which type of financing is ideal for your business. We work hard to deliver honest, reliable, and transparent customer service so you can feel confidence choosing us to help you meet your business capital needs.
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By leveraging our network of 45+ partner lenders, we can offer tailored solutions to businesses across the U.S. regardless of their size or industry.
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We strive to keep all of your information secure and private. We assign a funding specialist to guide you along the entire process.
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Our expertise has enabled us to understand small businesses and offer the highest level of service to you and your business.
HOW IT WORKS
How Does Invoice Factoring Work?
Businesses can use invoice factoring as a financial tool to sell their accounts receivable to a factoring lender. When the lender takes on the duty of handling unpaid invoices from clients, this gives the business access to quick cash flow. The factor is in charge of collecting unpaid invoices from clients; they subtract their fees and the cash advance given before giving the leftover amount to the firm.
Invoice Factoring Alternatives
The small business sends the lender invoices for review as part of the invoice factoring underwriting process. Invoices that have a 90-day due date and a approved business credit are frequently approved by the factor.
The lender will give the small business a cash advance equal to a percentage of the invoices' total value, usually anywhere between 70% and 90% of the sum of the invoices. The lender then collects the unpaid invoices from the clients, deducts their fees and the offered cash advance, and then returns the leftover amount to the company.
Even for businesses with less-than-perfect credit scores, invoice factoring is a simple funding alternative since lenders look at client creditworthiness rather than the business' own.
What Are the Benefits of Invoice Factoring?
Invoice factoring gives businesses a number of benefits, such as better cash flow, faster access to funds, and less paperwork. It also lets businesses turn their accounts receivable into cash right away. This gives them the freedom to invest in opportunities for growth or pay for expenses.
Another benefit of invoice factoring is that it does not require collateral. This makes it easier to get than other types of financing. Also, it gives businesses a predictable cash flow because they know when the factor will pay them. Invoice factoring can also help a business's credit score because it lets them pay their bills on time and get discounts for doing so. In turn, this can help businesses strengthen their relationships with their customers and suppliers.
Overall, invoice factoring is a good way for businesses to get money when they need to improve their cash flow and get money right away. It lets businesses focus on what they do best while the factor takes care of collecting invoices from customers who haven't paid yet.
WHO SHOULD APPLY
Who Should Get Invoice Factoring?
Invoice factoring is a good way for businesses to get financing if they need to improve their cash flow and get money right away. It's especially helpful for businesses with long payment terms, cash flow that changes with the seasons, or that need to invest in growth opportunities. Invoice factoring is also a great way for businesses to get money when they can't get traditional loans because they don't have enough collateral or have bad credit. Customers' creditworthiness is looked at, which makes it easier for businesses with less-than-perfect credit scores to get loans. Also, it can be helpful for businesses that have trouble managing their accounts receivable because it adds to their administrative work. The factor takes care of collecting invoices from customers who haven't paid yet, so businesses can focus on what they do best. Businesses that tend to benefit from invoice factoring are:
Professional service-based businesses
Manufacturing and pharmaceutical companies
What Can Invoice Factoring Be Used For?
Invoice factoring can be used for many things, like improving cash flow, managing working capital, and funding growth opportunities. By selling their accounts receivable to a factor, businesses can get money right away to pay for expenses or make investments in their business.
Managing cash flow is a common reason why people use invoice factoring. Invoice factoring is a way for businesses with long payment terms or seasonal changes in cash flow to improve their cash flow and pay for things like payroll or inventory. You can also use invoice factoring to handle your working capital. Businesses can make sure they have enough money to cover their short-term obligations by turning their accounts receivable into cash right away.
Also, invoice factoring can be used to pay for opportunities for growth. Businesses can use the money they get from invoice factoring to invest in marketing, new equipment, or plans to grow. This helps the business grow and brings in more money.
Overall, invoice factoring can be used for many different things, giving businesses the freedom to use the money however they need to. It is a good way for businesses to get money if they need cash quickly and want to improve their financial situation.
How To Qualify and Get Invoice Factoring
At Steer Financial, we will work closely with formulating a plan for your business. We will assess your business with our partnered lenders to evaluate the strengths and assets your business has to decide on the loan's size and conditions. Strong financial statements and a high credit score might also increase your chances of being approved. To make sure invoice factoring is a realistic choice for your business, our funding specialist will walk you through the entire process from start to finish. Below is a quick overview of the minimum requirements in order to get an approval:
Time In Business
At least 1 year in business.
At least $1M in sales per year.
Minimum of 680+ personal credit score.
No open bankruptcies for over 1 year.
HOW TO APPLY
Three Easy Steps to Secure Invoice Factoring
We have partnered with over 45+ lenders to ensure that we match your business with the best lender and the most competitive rates. We work quickly to provide an approval in as soon as a few hours.
By utilizing our streamlined fast funding approach, your business can access the necessary capital in as little as 24 hours from the moment you approve the terms, ensuring a timely and efficient process.