influx of cash

Collections and disbursements are uneven – like temporary staffing agencies, where employees are Accounts Receivable Factoring bi-weekly by the agency but its invoices may only be settled by the employer monthly . A bank’s line of credit is used for “general working capital” support. This means it bridges a borrower’s working capital funding gap; it would usually be frowned upon to use the proceeds to fund a dividend, for example. AR factoring is much simpler and transparent compared to taking loans. That’s why you shouldcontact us at Resolveto learn more about how our financing solution will help you achieve everything factoring does, with less downside. Now let’s look at the type of situations where you can take advantage of receivables funding.

  • Moreover, these business owners expand their companies more often and are less likely to use personal savings for cash flow.
  • Selling, all or a portion, of its accounts receivables to a factor can help prevent a company that’s cash strapped from defaulting on its loan payments with a creditor, such as a bank.
  • Alternatively, you can work with a factoring company for several years to grow gradually yet consistently.
  • With recourse factoring, if a customer fails to pay, you are responsible for buying back the invoice from the factoring company.
  • To help you understand how accounts receivable factoring works, let’s look at a step-by-step break-up of the process.
  • In traditional factoring, the factor buys all the company’s debtors for a percentage of their total value.
  • Factoring of accounts receivable is a valuable mechanism to turn your invoices into immediate cash, enabling you to fund your business operations.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. This is the fixed percentage of the claim amount that a company receives from the factor. Your business needs will determine the kind of factoring best for your situation.

Example of Accounts Receivable Factoring

The ease of the factoring process makes this form of financing suitable for almost any industry. Whether you work in cleaning, transport or marketing; with Factris you will enjoy the benefits of factoring at all times.


A company that has accounts receivables is waiting on payment from its customers. Depending on the company’s finances, it may need that cash to continue operating its business or funding growth. The longer it takes time to collect the accounts receivables, the more difficult it is for a business to run its operations. Factoring allows a company to sell off its receivables at one time rather than having to wait on collecting from customers. The receivables are sold at a discount, meaning that the factoring company may pay the company with the receivables 80% or 90%, depending on the agreement, of the value of the receivables. This may be worth it to the company in order to receive the influx of cash.

Non-recourse AR Factoring

Factoring can be used by even the smallest of businesses to expand operations. There are many good reasons to consider factoring as a way to improve your company’s cash flow. Our best expert advice on how to grow your business — from attracting new customers to keeping existing customers happy and having the capital to do it. Grow Our best expert advice on how to grow your business — from attracting new customers to keeping existing customers happy and having the capital to do it. Our network funding looks at the strength of the relationship between you and your buyer and bases the cost of financing on that.

Many factoring companies will offer an advance rate of 75-90% of an invoice’s face value. This higher advance rate is considered attractive by many borrowers and might justify the higher cost. Over the next 30 to 90 days, the accounts receivable factoring company collects the payment from the customer, depending on the payment terms. Then you might have considered working with an accounts receivable (A/R) factoring company. It’s one of several options that companies use to gain short-term cash flow and keep their business sustainable. Invoice factoring providers do not care about your business credit scores and don’t have payment schedules. Don’t be deceived; this service is not a business loan but the purchase of receivables in exchange for cash advances.

The Business Benefits of Accounts Receivable Factoring

In the case that it does not treat in a way that aligns with your brand, it can have a negative impact on your image. One of the main reasons that businesses use A/R factoring is because they wish to receive immediate cash flow. Waiting 30, 60, or 90 days for an invoice to be paid can leave bills unpaid and progress lacking. Whether you opt for recourse or non-recourse factoring will also change the rate you pay.


For example, a factor may want the company to pay additional money in the event one of the company’s customers defaults on a receivable. Factoring converts your accounts receivable into working capital without creating debt or adding liability. Factoring does not rely on your credit rating, collateral, or bringing in investors, so companies who have faced previous cash flow challenges may more easily qualify for funding. This type of financing helps companies free up capital that is stuck in unpaid debts.

What is a Factoring Company?

The rights and obligations under the Ottawa convention are similar to what is already applicable under Belgian law and therefore does not have any substantial consequences for Belgian factoring arrangements. Note however that a notification to or acknowledgement by the debtor after the assignor’s insolvency can no longer improve the factor’s ranking, given all creditor positions will be fixed on insolvency. A third-party creditor with an older competing claim will therefore prevail where no notifications were sent by either such third party or the factor prior to the assignor’s insolvency. Finally, it is possible to only disclose the assignment at a later stage . The notification can even be served after the insolvency of the assignor.