What is invoice factoring?
Invoice factoring is a method of financing in which a business sells its invoices at a discount to a factoring company in exchange for immediate working capital. This accounts receivable financing process allows businesses to skip the traditional waiting period required in collecting customer payments. Through invoice factoring, businesses gain access to instant funds allowing them to pay their everyday expenses and improve short-term cash flow.
Growth Capital Corporation offers convenient factoring solutions for businesses of all sizes. Our invoice factoring program is designed to solve your cash flow dilemma, thereby helping you achieve financial stability. If your business sells a product or service to another business (B2B), consider invoice factoring as a viable means of generating fast cash to meet your business expenses and to support your growth goals.
How does it work?
Growth Capital follows a simple procedure to finance your invoices. Most invoice factoring transactions are carried out in 2 installments:
The first installment is the factoring advance. The advance is calculated as a percentage of the face value of the invoice factored based on predetermined rate. The remaining portion of the invoice value is held as a reserve.
The second installment is the rebate of the reserve minus the factoring fee and is given after collecting the full invoice amount from the customer.
Here are the 5 steps involved in invoice factoring:
- Open an account with Growth Capital;
- Invoice your customer for goods and/or services provided and submit it for financing;
- We send you a cash advance between 80–100% of the invoice;
- Your customer pays Growth Capital when the invoice is due;
- We send you a rebate of the reserve amount, the remaining amount of the invoice, minus the factoring fee.
High factoring advances
The factoring advance is the percentage of the invoice value that your business will receive upfront. Factoring advance rates can range from 80% to as high as 100% of the invoice value. We will check the following parameters to determine your advance percentage:
The volume and size of the invoices you want to factor
The volume and size of your transaction plays a major role in calculating factoring advance rates and fees. Businesses submitting a high volume of large invoices may be given a high percentage cash advance or volume discounts.
The riskiness associated with your industry
Low risk industries (e.g. transportation, staffing, and consulting) are likely to receive higher factoring advances compared to risky industries with longer payment timelines (e.g. construction).
The credit quality of your customers
Invoice factoring is dependent on your customers’ ability to pay. Businesses that have reliable, creditworthy customers with good payment records will be eligible for high factoring advances.
Is it expensive?
Not at all. Typically, a factoring company will charge a small percentage per invoice as a fee. Factoring fees (also known as discount rate) can range from 1.5% to 6%, and is often priced out based on your customer’s credit and/or payment days. If you work with a customer who pays within 90 days, you may pay more than a company whose customers pay within 25 days. This has to do with the cost of capital. A factoring company often borrows from a bank and pays fees based on the days outstanding. Hence, the longer the money is out, the more it costs the factor.
Some factoring companies advertise low factoring fees to lure businesses into long-term contracts and then introduce their other fees—such as a per transaction fee, collection or overdue fee, credit check fee, etc.—making their service much more expensive.
At Growth Capital, our factoring rates and fees are transparent. We have no hidden fees or long-term commitments.
Top benefits of invoice factoring at Growth Capital:
- Fast access to immediate working capital: The invoice factoring process is quick and easy. New account set-up only takes a few days. After which, daily factoring cash advances are deposited within 24 hours into your bank account.
- Improved cash flow with no debt: Businesses selling invoices gain short-term cash flow that can be used to cover expenses and operational costs. Invoice factoring is not a loan; there is no risk of accumulating debt.
- Easy qualification requirements: Many banks and other financial institutions only deal with established businesses. Growth Capital works with any business regardless of size, age, and credit history.
- Credit control: Reduce overhead costs and resources spent on collections. Our invoice factoring program will manage the credit control functions for you.
The main qualification requirements for invoice factoring at Growth Capital are:
- You own a business: Invoice factoring is only available to businesses selling products or services to other businesses (B2B).
- Your invoices are unencumbered and free of liens: Invoices cannot be pledged as collateral to other institutions.
- Your customers have a good credit history: Decisions on providing funding to your business will depend on your customers’ ability to pay their invoices on time.
Is invoice factoring beneficial for your business?
Growth Capital’s invoice factoring program is suitable for businesses that can’t afford to wait for slow-paying customers. Selling invoices allows businesses to gain instant access to working capital and much better control of their cash flow. The funds can then be used to pay for other expenses and to finance growth. Invoice factoring is a great alternative to conventional business loans and lines of credit which can add debt to your balance sheet. Unlike loans, invoice factoring is scalable; the amount of funding you receive can grow as you issue more invoices. Growth Capital works with various types of businesses in different situations including start-ups, bank turn-downs, and those with less-than-perfect credit rating. Small businesses that don’t have a collection department or sufficient staff can also benefit from our credit control management services.
Choosing the right factoring company
We understand that working with the right factoring company is essential for your business success. We pride ourselves on our:
- Integrity: We manage your invoices professionally, deal with your customers fairly, and provide complete cost transparency,
- Customer service: We ensure top-quality customer service to deliver the best support to you and your customers,
- Terms and fees: The terms of the factoring agreement are clear and tailored to your business needs.
Get instant quote
At Growth Capital, we strive to help create financial stability for all of our clients. Our program for invoice factoring allows businesses to access immediate funds to meet their financing needs. We manage your invoices, so you can spend more time and resources on your business operations and growth. Don’t let late payments limit your success. To find out how much funding your business can receive, get an instant quote today!
Invoice factoring is a cost-effective and accessible way for businesses to raise funds. Growth Capital provides fully customizable factoring plans based on individual needs and circumstances. Our invoice factoring program offers low interest rates, on-time payment, and phenomenal customer service to back your business. We provide flexible cash flow solutions with competitive factoring rates and fees. Growth Capital uses an advanced accounts receivable factoring software to handle your invoice factoring transactions efficiently. Our professional credit control management services can save you time and resources spent otherwise on collecting payments from your customers. Instead of worrying about invoice collections, you can focus on what’s important—running and growing your business to reach its full potential.