with the Best Loan Rates
Waiting to get paid is one of the biggest frustrations for many businesses. If you are a company with seasonal business or long payment cycles – you can relate. Invoice factoring is the solution you are looking for! It turns invoices into cash that you may use to meet your present and immediate business needs.
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What is Invoice Factoring?
Invoice Factoring is a financial transaction in which a business sells its accounts receivable (invoices) to a third party (factoring company) to free up their cash. The main objective of such transaction is usually to secure working capital to meet the current business needs. There are usually three parties involved in invoice factoring transaction: the company that issued the invoice, their customer who owes payment on the invoice (also known as the account debtor), and the financing company who can supply the cash (often referred to as the factor).
Who qualifies for Invoice Factoring?
When unable to qualify for a traditional type of financing such as a bank loan or a corporate credit line, invoice factoring solution becomes very convenient for most business owners. Even so, there are certain criteria that must be satisfied: a clean legal and financial background of the company and the owner himself, customers with solid credit that make these invoice payments, and invoices that have already been issued within reasonable time.
Pros of Invoice Factoring
Improve Your Cash Flow
While every business should have emergency funds available for times when the market is undergoing slower production, sometimes a crisis lasts longer than the money does. You need to expand your operations? Hire new employees? As unpredictable as they are, invoice factoring helps you manage these risks by providing you the access to immediate cash.
Being able to obtain the funds when you really need it can make or break your business at times. Invoice factoring gives you a quick access to working capital to cover a funding gap caused by slow-paying customers.
High Approval Rates
Unlike much more rigorous qualification standards of traditional lenders, invoice factoring requirement checklist is shorter. In this case, all that matters is the value of the invoice, the creditworthiness of your customers, and your financial and legal background.
No Collateral Required
Falling under unsecured financing category, invoice financing doesn’t require collateral — an asset such as real estate or inventory that the lender can seize if you fail to pay.
Cons of Invoice Factoring
Yes, there are costs. Invoice factoring requires additional fees, such as application fees, processing fees for each invoice you finance, credit check fees, or late fees if your client is past due on a payment. Late payments can trigger an increase in your annual percentage rate, the annual cost of borrowing money with all fees and interest included.
Watch Out for Your Customers
The factoring company will need to verify the creditworthiness of your customers as one of the pre-requirements for approval. If the customers have bad credits and late/missed payments registered in their history, you may be derailed from your financing.
Why is Invoice Factoring with ZapRates better than with other lenders?
- Turn invoices into cash
- Credit lines from $20,000 to $5M
- Cash in as fast as 1 day
- No paperwork
- No termination fees
- No reserves, no minimums
- Fund only the invoices you want
- Rebates distributed same day
- Use as long as you like