7 Things You Need to Qualify for Invoice Factoring Services

CapFlow Funding Group
December 16, 2022

Table of Contents

What are invoice factoring services? 

Invoice factoring is a service provided by alternative financing companies that involves selling your outstanding invoices in exchange for cash, notably known as factoring. The factoring company or “factor” purchases an outstanding invoice, and advances a percentage of that invoice. Additionally, the factoring company will handle payment collection of the invoices directly with your customers. Invoice factoring services provide many benefits for a business, but there are qualification requirements to keep in mind when applying for invoice factoring.  

Factoring Application  

One of the most important requirements for invoice factoring is fully and accurately completing an application. Factors typically request invoicing volumes and other personal information. The more detailed information you provide, the more accurate and seamless the beginning steps will be. The industry of the applying company, along with the type of customers invoiced, will help a factoring company determine whether to move forward with the transaction or not.  

 

Your customers make a difference 

Unlike a traditional bank loan, a business’s credit is not a major factor for approval. Instead, they consider the credit risk of the clients they invoice. The main reason for this – the clients will pay the factoring company directly, and do not want to risk nonpayment. It would be in a business’s best interest to consider which customers have solid credit, reputable relationships, and honor debts to get approved. 

 

For invoice factoring services, factors will be more concerned with a client's credit worthiness.

Factors tend to be more interested in your client’s credit worthiness than yours.

Have an A/R aging report ready to go 

An accounts receivable aging report lists out any unpaid invoices, notes, and credit memos. This is an important document required for factoring. Factors will typically use this document to track what outstanding invoices you have, how much is owed, and when they will receive payment. This report may also be referred to as a schedule or schedule of accounts receivable.  

Invoices = Factoring 

One obvious – yet extremely important requirement for qualification is having invoices to factor. Without any unpaid invoices, you will not be approved for factoring services.  

 

With invoices to factor, invoice factoring services may not be provided.

Without invoices to factor, you will not be able to factor.

 

Tax ID number  

A factoring company will also require a government-issued tax identification number (in some cases your business utilizes an individual’s social security number). They will use this number to verify your organization’s tax status, along with verifying if your business has any outstanding lien(s). 

 

Bank Account 

Many factors may not transfer money to a personal bank account. They tend to wire money to business-only accounts or ACH (Automated Clearing House) transfers. Simply put, if you would like to receive funding from a factor, you will need to have a business bank account.  

 

Business Financial Health 

Factoring companies want to ensure the organization they will potentially work with is financially healthy and sound. To do this, your organization may be requested to illustrate financial reports. These include, but not limited to: Profit & Loss or Income Statement, a Balance Sheet, Aging reports (A.R. & A.P), and bank/deposit account statements. The more readily available these documents are, the most swift and efficient the application process is for your business. 

 

Working with a Factoring Company 

Once a factoring company receives your application, they will tell you what other information they need from you. It is helpful to be prepared for their requirements – the earlier you send the factoring company all documentation, the sooner you can get paid! 

Who Benefits from Invoice Factoring?

Invoice factoring is a smart cash flow solution for consulting firms that face long payment cycles. Instead of waiting weeks or months for client payments, they can convert outstanding invoices into immediate working capital. This allows them to cover payroll, invest in growth and manage day-to-day operations without financial strain. 
CapFlow Funding Group provides construction companies with the cash flow solutions they need to stay ahead. In an industry where delayed payments are common, invoice factoring helps firms bridge cash flow gaps, ensuring they can pay subcontractors, purchase materials and over operational costs. With reliable funding in place, businesses can keep projects on track, take on larger contracts, ad focus on growth without financial setbacks. 

 

Invoice factoring has numerous benefits and can help you grow your business with extra cash in hand. At CapFlow Funding Group, we provide instant liquidity with limited paperwork required.

Commonly Asked Questions

Simply CLICK HERE to answer a few short questions, or call our underwriting department today at 201-842-7725.

Most CapFlow clients are manufacturers, distributors, service providers, consultants or contract employees with annual revenues ranging from $250,000 to $25 million and five to fifty clients. These clients can range from large, national companies to small local businesses. Keep in mind that exceptions are always worth exploring.

CapFlow Funding provides factoring services to small and medium-sized businesses nationwide. While virtually any business can use factoring, you are an ideal candidate if your business fits one of these typical profiles:

  • You are a start-up or have a relatively short operating history
  • You are experiencing or anticipating rapid growth
  • You have been negatively impacted by the economy or industry events
  • You have a long sales cycle, requiring upfront capital to pay employees and vendors while waiting to be paid on terms up to ninety days

Once you become a CapFlow client, all you have to do is send us a schedule of the invoices you wish to finance.  We’ll verify the invoices and pay you 75% – 90% of the invoice face amount within 24 hours, wiring you capital directly to your business bank account.

When CapFlow purchases an invoice, we ensure that payment is made directly to our lockbox.  Once we receive payment from your customer, we forward the balance to you, less a small fee.

CapFlow has alternative financing programs such as Micro-Factoring, FactorLOC, Revenue-Based Financing and more!

There are three ways a customer will know to pay us for a particular invoice:

  • Notice of Assignment – We will assist you in providing a letter to your customers explaining that you have entered into a new liquidity facility that will enable you to grow and meet your increasing demand. That letter will mention our financing relationship.
  • Verification – With certain invoices, CapFlow may contact your customer to confirm that he or she has received the invoice and understands that payment should be made directly to us.
  • Information on the invoice – The “Remit To:” section will show our name and lockbox mailing details.

Your business will be able to:

  • Access working capital immediately without layering on expensive and dilutive equity or without the need to repay principal and interest on a loan.
  • Have CapFlow collect your receivables on your behalf, thereby freeing up your staff and resources to increase sales and grow your business.
  • Take advantage of supplier discounts offered for rapid payment.
  • Work with a partner such as CapFlow who has access to credit and fraud databases that can assist in vetting new customers and establishing customer credit.

Absolutely! One of the biggest benefits of invoice factoring with CapFlow is that we can help you evenly match your cash inflows and outflows. Slow-paying customers can cause a working capital mismatch, especially when your suppliers need to be paid quickly. With immediate advances from CapFlow, you can pay your suppliers or meet payroll without having to wait for your customers to pay you.

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