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How Factoring Services Can Help Your Business

Is cash flow a problem for your small business? If your business has unpaid invoices, discount factoring services in Kennesaw, GA, can help you generate the cash you need now.

Many businesses offer their supplies, vendors, or other customers 30-, 60-, or 90-day pay periods as a way to encourage sales. When you extend this credit, you’re not doing your customers a huge favor, but you are inadvertently setting yourself up for cash flow problems. Your operating expenses aren’t put on hold while you wait for payment, right? You need that revenue to help you pay for things like inventory, paychecks, and other overhead costs.

What are your options? The best option for companies with a stack of unpaid invoices is to turn to factoring companies in Kennesaw, GA. 

How Does Factoring Work?

The simplest explanation is that factoring allows companies to sell the value of unpaid invoices before the customer holding these invoices pays you. Factoring companies do the following:

  • Purchase all or a portion of your company’s receivables
  • Collects on them when the invoice becomes due
  • Assumes all costs and collection activities
  • Pays you cash immediately at a discounted price

Factoring is a good alternative for companies that don’t want to apply for a line of credit or take out working capital loan.

Does Factoring Cost Me Money?

That’s a great question and something that all companies considering discount factoring in Kennesaw, GA, should ask. When you open an account with a factoring company, they’re going to front you the money for the open invoices and assume responsibility for collection of the invoices. The factoring companies will hold back a portion of the receivables before they pay out cash to you. For example, if the invoice is for $15,000 your company typically would receive 80% or $12,000 in cash from the invoice. The factoring company will then charge their fee on the 20% ‘reserve’ balance when the customer pays them and give you the remainder. So if their fee is 3% you would receive 17% back when the customer pays which in this example would be $2,550 and the total fee would be $450.

For companies that struggle to get their invoices paid on time or need cash immediately, it’s a good option. At its core, factoring is like a loan that isn’t recorded as one. The money you receive won’t be added to your balance sheet or need to be reported as additional revenue. If you’re interested in learning more about discount factoring services in Kennesaw, GA, speak with a factoring company near you to discuss the benefits and risks associated with this financial product.