As Your Business Grows
We Deliver The FUNDS
We Deliver The FUNDS
Invoice factoring is a financial arrangement where a company sells its unpaid invoices to a third-party finance company at a discount in exchange for immediate cash flow.
No, factoring will not hurt your company’s credit score, because it’s not a loan and doesn’t appear as debt on your balance sheet. Factoring companies don’t report to credit bureaus the same way lenders do.
In fact, factoring can help your credit profile indirectly by improving cash flow, which lets you pay suppliers and other obligations on time.
Not necessarily. Factoring companies primarily assess the creditworthiness of your clients, not your business, since they’re the ones paying the invoice.
A wide variety of industries regularly rely on factoring receivables, such as trucking, freight, and transportation; staffing and payroll services; construction; oil, gas, and energy; manufacturing; medical and healthcare; agriculture and farming; government contracting; business services; and IT and telecommunications. While these are among the most frequently factored sectors, nearly any business in any industry can benefit from factoring if they sell on credit terms to creditworthy buyers.
In non-recourse factoring, the factoring company assumes the risk if your customer fails to pay their invoice due to insolvency of the buyer, shielding your business from potential bad debt. Non-Recourse factoring does not apply for invoices that are disputed by the buyer. The factor handles the collections process and absorb the loss if the invoice remains unpaid due to bankruptcy or insolvency. In contrast, with recourse factoring, the credit risk is shared between your business and the factor. If the customer doesn’t pay, the unpaid invoice is returned to your company, which must then either collect the amount due or cover the loss.
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In most cases, you can receive funds via a wire transfer to your business bank account, through ACH electronic payment, by express code, or by having a check mailed to you.
Your customers will be notified through a notice of assignment, instructing them to send payments directly to the factoring company. Usually, the invoice will include a clear stamp or note with the payment details and remittance address.
Yes, typically they send a one-time notice of assignment to inform your customer to direct payments to the factoring company. Factoring providers are mindful of your client relationships and ensure all communication is handled professionally and respectfully.
The approval process for invoice factoring is generally straightforward and much quicker than the often time-consuming procedures required for bank loans. Additionally, since factoring involves selling receivables rather than borrowing, it doesn’t add any debt to your balance sheet.
Unlike a bank, which focuses on your company’s financial history and cash flow, we base our funding decision mainly on the creditworthiness of your customers. We can make a funding decision quickly, while banks may take weeks or even months to approve a loan. Learn more about the difference between a bank and a factoring company.
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Invoice factoring isn’t as expensive as many business owners think, especially when you compare it to the cost of cash flow problems. Instead of taking on debt, you’re simply accessing money you’ve already earned. The cost is typically a small percentage of the invoice value, and it often ends up being more flexible than traditional financing.
You can get paid in as little as 24 hours. Once your invoices are submitted and approved, funds are typically advanced the same day or within one business day.
No, invoice factoring does not hurt your credit. Unlike traditional loans, factoring is not debt, it’s the sale of your receivables. That means there’s no loan to repay and no additional liability on your balance sheet. In fact, factoring can actually help your financial position by improving cash flow, allowing you to pay your obligations on time, and reducing reliance on credit.
If a bank or lender has a lien on your company’s assets, let us know right away. We will ask the bank or lender to subordinate that lien. Some banks will accommodate the request and others may decline, depending on your circumstances.
Our number one referrals come from loan officers who want to help their clients with cash flow, so many banks are familiar with this kind of interim financing. Another option is to pay off the loan if there are enough receivables to leverage the buyout. If the bank does not want to subordinate, we have other financing alternatives, such as our trade payable finance program if you sell to a large buyer.
Yes. Tax problems are handled on a case-by-case basis. Let us know immediately so we can discuss a lien subordination with the tax entity or request a payoff amount. If there is enough leverage, we can use the initial funding to pay off the tax entity. More information on factoring receivables with a tax lien.
Possibly. Please contact us before filing, as there may be some options for you.
A short application, your company’s most recent sales history, your company documents, a master customer list and a sample invoice.
Usually 80% of your business comes from 20% of your customers, and these are the most likely to factor. However, we will factor 100% of your customer base as long as your customers are creditworthy. To approve your customers, we need their names, addresses, phone numbers and the credit amount you want for each. This saves you time when submitting invoices.
Yes, as long as it is not a one-time deal. While many factoring companies require all payments to go to their lockbox, we offer selective factoring: you choose which customers and which invoices to factor, or factor only part of a large invoice.
The initial funding takes between 3 and 10 business days after we receive your signed agreement. To speed it up, you can send invoices to be funded together with the signed contract. After the initial funding, you can receive funds within 24 hours of invoice verification.
We can fund up to 100% of your company’s creditworthy accounts. Depending on the industry, the advance rate is typically between 75% and 98% of the invoice value.
Send the check to us immediately. This is common, especially around the first funding, and applies to any factoring company you work with. Never deposit checks for factored invoices into your own account. We will notify your customer to pay us directly going forward.
The last thing we want is for you to lose a customer. We are not a collection agency and we will never harass your customers for payment. Maintaining your customers’ goodwill and confidence is of the utmost importance to us.
If a customer who is unfamiliar with factoring asks about the notice of assignment, simply tell them you have chosen a company to manage and finance your accounts receivable.
Gaining a clear understanding of how invoice factoring operates, along with its advantages, potential downsides, and how to select the right factoring partner, can help businesses determine if this funding solution aligns with their needs. Whether you're aiming to boost cash flow quickly or streamline your receivables management, invoice factoring can be a powerful asset in your overall financial strategy.
Get in touch with us today for a free quote and discover how we can support your business growth.
We are recognized as one of the largest independent providers of asset based financial services for small to mid-sized businesses. We offer a complete line of invoice factoring services, inventory finance, purchase order financing, international trade finance, supply chain finance, short term future receivable funding and other related financial services.
What Makes Us Unique? We offer funding for a wide range of industries and flexible funding requirements that most businesses can easily qualify for. Our competitors are challenged to offer this combination of services due to their standard underwriting infrastructure and limited industry experience.
Stop waiting 30-90 days for your customers to pay their invoices. Factor with 1st Commercial Credit and receive the working capital your business needs to grow.
