Gateway Financial LLC

Gateway Financial Blog

Improve Your Cash Flow with Factoring

If your customers are businesses (B2B) and you’ve been in business long enough, you know that customers can be unpredictable with their payments.  Sometimes they pay on time, sometimes they pay late, and sometimes they never pay.  That keeps valuable business capital tied up in accounts receivable that you could be using as working capital to manage your business.  That’s where invoice factoring can help you to improve your cash flow. How does invoice factoring work? A factoring company will typically buy your accounts receivable in two installments.  First they’ll pay you 80 to 90% of the face value for the invoices which means you don’t have to wait weeks or months to get paid.  The factoring company will then take over collecting the invoices from your customers.  When the customers pay, the factoring company deducts their fees, and the remaining portion goes to you as the second installment for the invoice purchase.  This is a great way to improve your cash flow while also benefiting from no longer having to handle the collections on your invoices.  Many factoring companies will let you factor invoices for selected customers or for your entire book of open invoices. Invoice factoring could be a good fit for your business if:
  • Your business’s customers are other businesses.
  • You’ve been in business for at least 1 year
  • You’d like to improve your business cash flow
  • Your business generates over $100k in gross sales annually
  • Your customers typically take 30 days or more to pay you
 

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