Invoice Factoring

Leap Ahead with Invoice Factoring

What is a Invoice Factoring?

Invoice factoring is a financial product, not be confused as a traditional bank loan. Invoice factoring is the purchase of a business owners accounts receivable for immediate cash. At time of application for a invoice factoring, Lily Pad Financial will review your review your company’s credit and historical transaction information, in addition to the invoices your company submits for factoring. A factor may ask personal documents, as well as perform credit checks on all parties. This discovery process ensures Lily Pad Financial of reliability of the business owner’s customers and their ability to pay the invoices on time.

An invoice factoring contract summarizes any fees, outline aspects of the payment plan, and the initial maximum dollar amount that you will obtain at funding. This initial maximum dollar amount is the maximum factored amount outstanding at any time When the business owner signs the contract, the factor will offer the business owner the advance rate. This rate is largely established based on the specific industry in which the business belongs, also its transaction history, and strength of your business. Some factors contracts spell out their qualifying process to determine factoring eligibility.

How Does an Invoice Factoring Work?

The typical invoice factoring contract is based around three primary factors:

    1. invoice value
    2. discount rate
    3. factoring period

The factor typically negotiates an advance 80% of the invoice value. The transaction fee or discount rate can range from 2% to 10% of the invoice. Take for an example, let us say company A has $200,000 outstanding invoices due within 30 days, and the business owner chooses to factor the entire amount at a discount rate of 7.5%. Company A would obtain $185,000 as their first advancement due to the factor has retain $15,000 as their fee. Factoring period is vitally important because it will determine the fee amount paid by the business owner. The Factoring Period is the time granted by the factoring company to all a company’s customers to leave their invoices open. Factors charge month or daily discount rates; therefore the length of time Company A customers leave their invoices open affects the business owners final cost. If you have any further question scroll over to the Lily Pad Financial FAQ’s page.

What Are the Benefits of a Invoice Factoring?

Invoice factoring or Accounts receivable factoring offers many companies in various industries two primary benefits: working capital and cash flow. No matter if you are armed services, trucking company, temp agency, wholesaler or manufacturing company you can take a leap in success with Lily Pad Financial invoice factoring products. Here is a thumbnail sketch of the advantages of financing with a merchant cash advance:

  1. Remaining current with suppliers and creditors
  2. Eliminating supplier constraints
  3. Reduce expenses with the ability to outsource credit
  4. Obtain cash discounts from suppliers
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