Invoice factoring typically involves the following steps:

  1. Agreement: The business (the client) enters into an agreement with a factoring company (the factor). This agreement outlines the terms and conditions of the factoring arrangement, including the discount rate, the advance rate (percentage of the invoice value advanced upfront), and any other fees or charges.
  2. Submission of Invoices: The business generates invoices for goods or services provided to its customers and submits them to the factoring company. These invoices represent the accounts receivable that the business wishes to sell to the factor.
  3. Verification and Approval: The factoring company verifies the validity of the invoices and assesses the creditworthiness of the business’s customers. This process helps determine the risk involved and the discount rate at which the factor is willing to purchase the invoices.
  4. Advance Payment: Once the invoices are approved, the factoring company advances a certain percentage of the invoice value to the business, typically ranging from 85% to 95%. This provides the business with immediate cash flow to cover its expenses and financial obligations.
  5. Collection: The factoring company collects payment from the business’s customers on the invoices it has purchased. The customers are notified to remit payment directly to the factoring company.
  6. Final Settlement: After the customer pays the invoice in full, the factoring company deducts its fees, including the discount rate and any other charges, from the remaining balance. The remaining funds are then remitted to the business.

Overall, invoice factoring provides businesses with a reliable way to improve cash flow, manage working capital, and mitigate the risks associated with late payments from customers. It’s a flexible financing solution that can be particularly beneficial for businesses with inconsistent cash flow or those looking to accelerate their growth.

America’s Factors offers a simple and streamlined factoring process, with minimal paperwork, quick approval times, and efficient funding, enabling businesses to access funds promptly and efficiently

For more information, please contact America’s Factors at 800-794-6786, complete the Inquiry Form or Online Application.