Many businesses have heard about banks and private companies that offer factoring services to assist businesses in paying accounts receivables until the actual bill is paid, however many businesses are still concerned about the actual facts regarding factoring. Questions that most businesses want to know is how much money do factoring firms provide private businesses, are fees high for factoring services, how long it takes to become approved for factoring, what benefits does a company receive if it uses factoring services as well as a whole host of other questions. However, there are no definite answers to these questions about factoring because each business receives a personalized quote depending on the business circumstances. However, there are some general answers that will help you understand factoring a little more.
Generally, when a company is interested in factoring in order to have receivables paid they can generally receive from 70% 85% of the amount of receivables up front and then the rest of the money when the invoices are actually paid. However, this percentage varies from factoring company to factoring company and the situation of the business seeking factoring services. Also, when the balance is paid to the company the factoring companys fees are deducted first.
In general, most companies that are approved for factoring services receive in the neighborhood of 70% 85% of their accounts receivables within a few days of being approved for factoring. Then, when the invoice is actually paid the factoring company will pay the final percentage after it has taken out the fees associated with the transaction. Most of the time percentages are in this range, but the actual number depends on many variables.
Another question that companies interested in factoring frequently ask is how long the factoring process takes and what they have to do to get the process started. Well, in general, the time span depends on the company that is offering factoring services. Some companies are able to receive funding within a week and a half and others might take up to a month or longer.
This depends on multiple variables, so the easiest thing to do is set up an appointment with a factoring firm to assess your business situation and time period for factoring.
Many businesses also want to know why they should use factoring services and the various benefits associated with factoring. Factoring gives your company guaranteed cash flow and helps you manage accounts receivables better. Other than this, many factoring companies provide weekly reports with your account activity as well as credit checks for companies you are considering working with.
In order to make a decision about whether factoring is good for your business or not, you will need to sit down and evaluate your accounts receivables, cash flow, need for capital and cash flow, as well as the benefits a factoring company could provide your business compared to the drawbacks. Many factoring companies offer consultations as well, so this might be a good idea in order to find out where you are and what possibilities are available to you.