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How the Invoice Factoring Process Works

Oftentimes, a company that relies on collecting payments from their customers can benefit from access to liquid funds immediately after the invoice is issued. After all, they need the cash flow to cover payroll, operating expenses, and to get started on fulfilling the next round of orders. Fortunately, the invoice factoring process exists as a financial product to help your business run smoothly, despite outstanding invoices and their specific payment terms. With invoice factoring, an alternative financing company, such as CapFlow Funding, will purchase your company’s outstanding invoices and fund you the value of those invoices at a small discount.

 

Invoice factoring has several benefits compared to other sources of funding that are available to businesses.  

In comparison to a traditional bank loan, alternative funding sources like invoice factoring are far more attainable, and generally come with a cheaper cost of capital.  

The factoring company will collect invoices from your customers directly.  A factoring company will also consider your customer’s financials, not your credit rating as a deciding factor. Furthermore, compared to other alternative financing sources such as a merchant cash advance, invoice factoring is a significantly cheaper option, and effectively provides working capital all the same. With invoice factoring, as opposed to a merchant cash advance, there is less risk for your business, as you do not need to rely on having consistent revenue to make debt payments on a daily or weekly debit. Instead, you are simply getting paid for your invoices sooner!  

Knowing that invoice factoring is a great option for your company, let us take a look at how the process works, and how CapFlow Funding can form a strong partnership with your business through factoring. 

 

Partnerships with factoring companies allow for businesses to network and get cash faster. The invoice factoring process can be done more smoothly when a business partners with a factoring company.

Build a strong partnership with an alternative lender like CapFlow.

 

Here is what a typical round of the invoice factoring process could look like. 

Invoice factoring with CapFlow Funding offers valuable flexibility for your company. All outstanding invoices are eligible for factoring. Provided that they are greater than $500.00, have payment terms that are less than 90 days, and are no older than 30 days upon receipt. Upon signing a contract with CapFlow Funding Group, submit the relevant invoices and supporting documentation. You will receive a large percentage of the total invoice amount submitted. This gives your business an immediate influx of funds without having to wait for your customers to send payment. You then have complete discretion over how to best use those funds to help your company grow.

The advance payment is typically around 80% of the invoice’s value. The remaining 20% will be returned once the invoice is paid off, minus fees. With CapFlow Funding, fees can be approximately 3%. This is significantly less than the factor rates for a merchant cash advance, which can range between 1.2 and 1.5. 

 

By taking ownership of your outstanding invoices, CapFlow Funding becomes a strategic partner with your company.  

Both sides benefit when your business thrives and grows. The account executives at CapFlow Funding will work with you to form the best partnership possible. With their wealth of experience and knowledge, they can offer guidance on various matters regarding your business. They can also customize your contract. For example, setting up an escrow account if it’s a good fit for your company. Invoice factoring is a great service to get your business working capital. Account executives at CapFlow Funding Group will prove to be great partners in making your company more capital efficient.  

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