Invoice factoring is a quick and easy way to boost your businesses cash flow. We’ve got everything you need to find the right invoice factoring service for your business.
Invoice factoring is a smart way to avoid the hassle of chasing unpaid invoices, instead you can sell the debt to a third party who pays you up to 90% of the value. The invoice factoring company chases up the invoice on your behalf, and once it’s been paid off, they pay you the rest of the money minus any predetermined fees.Invoice factoring can free up your time to focus on more important tasks, increase profit, boost cash flow, protect you from debt and make it easier for you to accurately plan for the future.
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Prices vary greatly but there are a few things to look out for, these include service fees, discount fees and a monthly minimum fee. A service fee is the price you pay to use the invoice finance facility and is a percentage of your turnover. This fee is calculated based on your invoice volume and customer base. Larger businesses can negotiate a lower percentage but it tends to be between 1% and 2.5% of your annual turnover. This fee is charged monthly and is designed to cover the costs of keeping your account current.
The discount fee is calculated based on the value of the invoices you want to receive finance for. This fee tends to be around 1% to 3% of the invoice value and is applied to the cash advance you receive for the invoice.
Some companies may require you to factor a specific number of invoices a month. If you fail to meet this requirement, you may be charged to make up the shortfall – this is your monthly minimum fee.
Not all businesses are eligible due to being considered high-risk. Invoice services usually require that your sales are $5,000 or more per month. Your company must be incorporated in the US and your business has limited or no access to bank financing.
Invoice factoring can revolutionise the way you carry out your business. With less stress and more cash flow, you have more options and opportunities to run your business the way you want to without being limited by a lack of funds.
Here are some of the main benefits to invoice factoring: