What is Accounts Receivable Factoring?
Accounts receivable factoring enables businesses to convert their outstanding invoices – or accounts receivable – into immediate cash. Accounts receivable factoring companies purchase those invoices and pay their clients a large percentage of the invoices’ value upfront. The factoring company forwards the client the balance, minus a small factoring fee, after the client’s customers pay. Receiving the funds owed to them in advance for work that has been completed, rather than waiting 30, 60, or even 90 days, helps companies maintain a healthy cash flow and plan for the future. Sometimes called AR factoring, this tried-and-true funding alternative has helped millions of companies stabilize their finances and increase their profitability.
Some business owners ask why banks are unwilling to lend to companies that have good-quality accounts receivable, but that lack other collateral, such as real estate, equipment and inventory. That’s where factoring accounts receivable comes in. While inventory is a tangible thing that you can touch and see, accounts receivable are a “right to receive a future payment” and have great value – in the future. Factoring accounts receivable makes the money that is sitting in a company’s outstanding invoices accessible to the company to use right away to pay bills, cover payroll, and more. Factoring puts your accounts receivable to work for you as soon as you submit your invoices along with proof that the job was completed.
Accounts Receivable Factoring Companies
Factoring companies are accounts receivable specialists. They do not require their clients to have fixed assets, nor do they require a first lien in cases where fixed assets do exist. As a result, factoring companies are likely to advance far greater amounts against accounts receivable than other lenders.
Service industries, such as nurse staffing, temporary staffing, IT staffing, and security guard services, are examples of industries where accounts receivable factoring is common, yet individual companies lack any significant fixed assets. Trucking, on the other hand, is an industry in which factoring is prevalent, and companies have fixed assets, such as tractors and trailers, usually financed by another lender. Accounts receivable factoring is also popular among manufacturers, wholesalers, importers and distributors.
Interstate Capital, one of North America’s leading accounts receivable factoring companies, has worked with more than 10,000 clients since 1993 and remains one of the industry’s largest independent factoring firms. Company managers are able to approve new clients quickly and easily and set low factoring rates and high advance rates without outside interference. With one of the best benefits packages in the field, Interstate Capital offers a number of free services including credit checks and professional collections.
When you’re ready to expedite your cash flow and save time and money with accounts receivable factoring, contact the friendly factoring specialists at Interstate Capital.