LEVERAGE OUTSTANDING INVOICES
Invoice Financing, otherwise known as factoring, allows you to finance up to 90% of the value of your outstanding invoices. This can be a very affordable type of specialized financing when late invoice payments are causing cash flow problems. No repayments are made – the factoring fee is simply deducted when the invoice has been paid.
My invoices are net-60 but I run payroll every week. Through Clear, I was able to factor 80% of my outstanding invoices to meet my payroll requirements and the cost of money was under 3%. It was a very easy, very quick approval process.
There are no restrictions on the use of funds. It can be used for any business purpose
The factor rate, also called the discount rate, is the cost of money, similar to an interest rate. For example, a monthly factor rate of 1% is the equivalent of a 1% simple interest rate – Your monthly cost of money would be $1 for every $100 advanced.
An invoice factoring approval typically has two components – A maximum credit limit is the total value of all invoices you can finance. A maximum advance is the total value of any 1 invoice you can finance.
This varies by lender but is generally limited to between 90-120 days.
Typically, you will be responsible for reimbursing the lender the value of the invoice financed.
It’s not that difficult to get approved. However, keep in kind that approval is a 2 step process. Your business needs to be approved and each customer also need to be approved.
The lender could charge additional fees including origination fees, service fees, collection fees etc.
No payments are made. The finance charge is simply deducted from the invoice when it’s paid.
The invoices factored would serve as collateral.
