A business in need of an immediate cash infusion will often turn to factoring finance companies in hopes of a speedy, 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, or hiring new employees, etc.
Just like traditional financing solutions, applying for factoring finance / invoice factoring requires attention to detail. The more knowledgeable you are, the faster you can expedite the process and ultimately achieve quicker access to additional working capital for your business.
Here are three key steps to follow when applying for invoice factoring / factoring funds
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 all facets of your company’s financial history and business operation. Every lender is going to ask you about your company finances, so best to be 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. Be well versed in these topics and be able to also provide documentation to substantiate your declarations.
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 you determine which is the best financing option for 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 may show up when they run your background check so best to be upfront and forthright. Remember that with invoice factoring, lenders tend to not be too particular about your business’ credit history (comparative to other types of loans.) So, in the event you do have any past issues, it will not 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, with some factoring companies requiring business owners to submit a minimum amount of pending invoices every month. In these cases, if you’re unable to deliver, you may be charged a fee.
Your contract should clearly list the agreement terms, rates and any associated fees. After you’ve read it, be sure to verify all the information contained in the document. Then read it again, and then once more final time. Once you sign it, it’s legally solid. .
If you want to know more about factoring finance or invoice financing, the specialists at SMB Compass can help. Our team of experts can help you find the type of financing that is just right for your business.
Remember, time is money and money is time.
Give us your time, and we’ll help you get the money!