Invoice Factoring is Profitable

In this example, the cost of factoring is based on $300,000 factored invoices at 3%. You can see that by leveraging the short term capital, PDQ Staffing Company was able to yield an additional $66,000 in profit, including the fees to factor.

This example is just a sample view of how factoring can assist a staffing business, or any business that is looking to grow their business. Invoice factoring can provide much needed cash flow quickly to a business, without extending additional credit and for business situations where the business is unable to get any additional credit lines. If your company has strong gross margins currently and is looking to continue its growth pattern, factoring is an option to strongly consider to create additional growth.

Understanding Factoring

Factoring is not a business loan, but an advance on an invoice or accounts receivable. The credit that is evaluated to complete a factoring agreement if any is required, is often based upon the company that owes the money to the business; this method requires no additional credit on the part of the business looking for capital. Once the factoring relationship has been established, the funding for an invoice or accounts receivable can take between 1-2 days, giving the business a short term cash turn around option.

The factoring company will fund between 80-90% of the total invoice and the remainder minus any applicable fees to the business once the invoice has been collected and paid. Factoring companies charge any where between 1-3% of the invoice total per month. Factoring service fees range based on the relationship with the business, the estimated costs to administer the sales ledgers and collections and the timeframe between initial payment to the business and full collection of the actual invoice from the customer.

If a company that is being invoiced for factoring has a bad debt history, the factoring company will charge a higher percentage to the business when providing the upfront cash. These are all topics that you will want to discuss with the business factoring company that you select.

If the customer pays the invoice quickly, the business does not have as high of a fee to complete the factoring transaction. Invoice factoring is a simple and easy solution to provide a business the short term cash that is needed.

For a FREE Consultation, please call us at (800) 954-0012