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Most companies think when factoring their invoices they are giving away the debt to a lender. This is misconception. The invoice will always remain your asset. Factoring lenders do take charge of the invoice and in most cases chase that debt. Again the payment of the invoice is still the business owners responsibility. Factoring companies do receivable finance, purchasing invoices and funding a percentage of them to you within 24-48 hours of verification. The balance of the invoice is funding, when the debtor pays the full account to the lender.
So if you have ten thousand dollars of outstanding invoices, if the whole book has been verified and completed you can have up to seven to eight thousand dollars in your bank in 24-48 hours. The final 2-3 000 dollars will be paid to you once the debtor pays their account.
Invoice Factoring has different fees, so its important to know what turnover you will be doing in the next 12 months, also the debt turn, (amount of time the average clients take to pay 30 days etc.). This with a combination of how good the back end procedures are in your firm, will determine how much your fees will be.
For more information about Account Factoring or Receivable business loans, be sure to call our office. Trade Debtor Finance Consultants Pty Ltd or email email@example.com 07 5547 8731