Commonly Asked Questions About Using Factoring For Collections
Companies that need fast cash have an amazing opportunity to collect now. They can utilize a service known as factoring to discover their maximum spending power after collection efforts. These services eliminate the extra steps that take time away from their busy workday. The following are commonly asked questions about using factoring for collections provided by invoice finance.
How Soon Can the Company Acquire Their Funds?
Once they are approved, they can acquire the funds right now. The factoring service can provide them with a check, cash, or direct deposit the funds into their account. All they have to do is submit their invoices and wait for the credit assessment to be completed. It’s that simple.
Why is a Credit Assessment Performed?
The credit assessment is performed to identify risks that could create slow payments. The factoring service must assess each customer to determine if they present these risks or issues. Any high-risk accounts are rejected. The purpose is to collect quickly without major issues. This doesn’t indicate that the factoring companies will reject all invoices, or that they won’t accept the company as a client. However, the risks must be identified first.
What is the Maximum Percentage Companies Can Expect?
The most common percentage provided to companies is 80%. This doesn’t indicate that the factoring service won’t provide a higher value. The standard option for the factoring loan is 80% of the invoice balances upfront and the remaining balance once all invoices are collected.
What Factors Affect the Total Value of the Advance?
The credit risks presented by the company’s customers and any credit issues experienced by the company itself affect the advance value. The factoring service must protect their interests as well as their clients. They won’t present a high value if it places them at a financial risk.
What are the Terms of These Loans?
The loan requires the company to sign a contract designating that they will repay the factoring industries providing the loan. The contract requires them to pay back the advance before a maximum of ninety days. The factoring service provides the remaining balance of the invoices after they are collected.
Companies who want fast access to their capital utilize factoring services. The services give them immediate access to a large percentage of their incoming profits. They provide access to outstanding invoices owed by their customers without major difficulties or on-site collection services. Companies that want to use the services contact factoring companies today.