A business in need of immediate cash flow will often turn to factoring finance companies for a quick and viable solution. How it works: businesses can sell their invoices to the factoring companies at a discounted rate to gain fast access to cash. Once the money is received, it can immediately be put towards funding daily business operations, paying suppliers, making payroll, investing in new equipment, hiring new employees, etc.

Like traditional financing solutions, applying for factoring finance/invoice factoring requires attention to detail. The more knowledgeable you are, the better you can expedite the process and ultimately achieve faster access to additional working capital for your business.

Here are three key steps to take when applying for invoice factoring/factoring finance:

1.  Have a Firm Understanding of Your Company’s Financial History

Before you meet with lenders or begin to submit applications, it’s imperative that you’re well-versed in your company’s financial history and business set up. Every lender is going to ask you about your business’ finances so make sure you are prepared to answer concisely and confidently. Their questions may pertain to your scope of work, number of clients, monthly revenue average, outstanding invoices, and liens or judgments against your company. Know this information in and out and be able to provide documentation.

2.  Consult with an Expert

Prior to submitting your application, you should consult with an invoice factoring specialist to ask them about the options most suitable for your business based on its financial history and present needs. Lenders typically offer different types of factoring services, so these experts can help determine which is the best financing option to meet your specific business goals.

Always be transparent with them. After all, the rate of your financing is based on the information you provide your lender. Be sure to tell them everything they need to know, including any tax liens or bankruptcies. Any information omitted will show up when they run your background check so you may as well be upfront. Remember that with invoice factoring, lenders tend to not be too particular about your business’ credit history (comparative to other types of loans.) If you do have any past issues, they won’t disqualify you from securing the funds you need.

3.  Know the Commitment You’re Making

Different types of lenders offer different types of factoring terms, and there are factoring companies that require business owners to submit a minimum amount of pending invoices every month. In these cases, if you’re unable to deliver, they may charge you a fee.

Your contract should clearly list the agreement terms, rates and any associated fees. After you’ve read it to verify all the information, read it again. And again. Once you sign it, it’s pretty set in stone.

If you want to know more about factoring finance or invoice financing, SMB Compass can help. Our team of lending experts can help you find the best type of financing option based on your business’ needs. Feel free to call us via phone call at (646) 569-9496 or email us at info@smbcompass.com. We’d love to hear from you!