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Your Guide to Selling Receivables to a Factor

Although the United States economy depends on new investments and exciting entrepreneurial opportunities to continue functioning, the current economic climate doesn’t exactly always make investments easy. It can be a challenge to rustle up the capital you need to take advantage of an investment opportunity or increase your cash flow in a timely fashion, and even traditional methods like bank loans can take too long to be effective. Your business can, however, sell your company invoices to a factoring company, which assumes the risk of the accounts receivable and gives you advance funds immediately.

How This Helps You

Selling receivables to a factor is just another way of getting funds quickly, so you can take advantage of a new opening in the market or advance your business to the next level without saving your cash over a long period of time. Current accounts and healthy invoices have the most value to factors, although even accounts at the ripe old age of thirty or even sixty days are still considered valuable for factoring purposes. Unfortunately, accounts that are over ninety days old are usually deemed to be far too risky to factor.

However, some funding companies actually pay more attention to your customers’ buying habits and their history to assess the value of your older accounts, meaning that they have a better idea of the risk they assume. These companies tend to know what they’re doing and work well with those who have a reliable set of customers. The most valuable receivables for any factor are always going to be recurring invoices with reliable customers paying their invoices on time. If that sounds like your customer base, you should start looking into selling receivables to a factor today to see how it can benefit you.

Why More People Don’t Sell Receivables to Factors

When you consider how easy the arrangement of selling receivables to a factor is – effectively, you’re getting the money you’re owed earlier than you otherwise would – it might seem surprising that more companies don’t sell their receivables. The reality of the situation is that some businesspeople don’t like the loss of control over the collection process that selling receivables entails. To counteract this, the best funding companies actually make it their mission to protect your relationship with your customers, as they know full well that if you don’t get paid, neither do they.

Also worth taking into consideration is that some companies’ customer bases have fairly poor credit, meaning that assuming the risk of the receivable is not a great idea for the factoring company. However, great factoring companies screen new clients to help you inform yourself about the risk of taking them on, helping you out in the maintenance and expansion of your business.