Receive FREE Quotes from Factoring Companies

What is factoring?
Factoring is essentially a financial transaction where a company/business sells its accounts receivables (or invoices) at a discount to another company. This other company is then responsible for collecting on that invoice from the third party.

There are essentially three parties involved in a factoring transaction: the seller, debtor, and the factor. The seller is owed money (accounts receivable) by the debtor. The seller then sells its invoices at a certain discount to the factor (third party finance company) to get immediate cash. Ultimately, the debtor pays the full invoice amount to the factor, therefore the factor makes a percentage gain on the account.

Why you should consider factoring your invoices or accounts receivable
Many businesses have cash flow problems. Sometimes customers pay 30-120 days after being invoiced, which can cripple certain businesses. So, a business can choose to factor those accounts receivables and get the cash now for a slight discount. To many companies, factoring invoices can be a boon to business. It allows them to get immediate cash flow and to grow more aggressively.

Factors focus on the credit worthiness of the debtor, not the seller, when deciding to factor an invoice; many times in cases that a normal bank wouldn't loan money against.

How to choose the right factoring company
You should always talk with several different companies to get a feel for their individual styles of business. You can use Resource Nation's Factoring matching service above to have 5 high-quality factoring companies contact you.

- Have a meeting (phone or in-person) with each company that contacts you.
- Gauge their professionalism, their mannerisms, how they treat you, and their experience level.
- Remember, these people will be dealing with some of your most valuable clients/customers to collect payment on your invoices.
- You don't want an unprofessional or inexperienced company contacting your clients and harassing them.
- You want your clients to have a good experience when dealing with these people so that it doesn't sour your relationship with them.
- You should also review all letters and correspondence that the factoring company uses to contact clients.
- Find out how the factoring company handles past-due accounts and at what stage they refer the client to collections.