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Business Loan - Factoring

Purpose

Business factoring (also known as “accounts receivable financing”) is a special type of funding that are offered to businesses that experience long payment cycles. Typically, these types of business are very profitable but have poor cash-flow due to their terms of trade with clients. A strong trading history is preferable. Cash generated from factoring facilities can be used for any legitimate business purpose.

Benefits

Opportunity to focus on sales without worrying about cash-flow as the factoring company will pay you up to 90% of the value of each verifiable invoice immediately. This immediate cash injection allows business to continue, operational and production expenses paid, loans repaid, and stock replenished. This type of financing may be cheaper and easier to access than bank loans.

Security

Depending on the size of the invoices being factored and the industry in which the business operates, factoring companies may require security over the business and/or personal guarantees. This may mean if a customer does not pay the all or part of the factored invoice and defaults in their obligations, the borrower may be call upon to repay this debt. If the borrower cannot meet this repayment, the factoring company can exercise its rights over the assets owned by the business as well as the business owner’s personal assets. Repayment terms- Technically the borrower is not required to pay interest on factored invoices if paid on time by the customer. This is because a factoring agreement requires the borrower to sell invoices to the factoring company for which the borrower is paid up to 90% upfront. The factoring company then collects 100% of the invoice value from the customer, deducts their fee and pays the remainder to the borrower.

Process

To be matched with a Factoring loan bidder, just follow our anonymous Business Loans/Factoring listing process.