What is Factoring?
Financing Your Entrepeurrial Start Up with Factoring Through IACFB
What is Accounts Receivable
Factoring and How Can It
Help Small Business?

Get fast access to growth and working capital with factoring.

What is Accounts Receivable Factoring?

Factoring, or as it is more commonly known, accounts receivable factoring is a well-practiced method of business finance found throughout the world. It is characterized by both it's simplicity and it's ready availability to even the smallest of B2B business ventures.

Factoring addresses problems associated with cash flow and working capital shortages that accrue when a business begins to grant credit in the form of extended terms of payment to it's customers, thus generating accounts receivable.  In many cases, working capital is depleted as accounts receivable increase and in extreme cases, a small business begins to run out of cash and finds it cannot pay its current bills and often, even make payroll for employees. 

Factors solve such problems by providing "advances of payment" against the accounts receivable. Factoring Your Accounts Receivable The advances of payment allow the customers of a business to still enjoy 30-60 day terms of payment while the small business owner now gets an advance of cash immediately after shipping the goods or performing a service.  For small business owners, factoring creates a win-win situation for business owner and customer alike.

Factoring is Not a Loan

Factoring is a very powerful financial tool for small and mid-size B2B business owners worldwide with trillions of dollars of factoring volume being provided each year domestically and cross-border.  Factors based in the U.S. provide over $100 billion dollars in financing each year for our domestic small business owners, yet that figure pales when compared to many European countries, such as the United Kingdom, which generates more than double the volume of it's former colonies. 

Factoring is a unique form of business financing which is actually not a loan at all. Instead of simply lending a business owner a defined lump sum of cash with required monthly payments (as with a bank loan), factors purchase the accounts receivable (invoices) of a business immediately upon creation by that business.  Typically, an immediate advance is 80% of the invoice face amount.  The 20% balance of the invoice not advanced, is remitted to the business owner once the payment has ultimately been received from the customer in 30-60 days.  This 20% "rebate" is only modestly reduced by the factor's fee for services.

Broad Availability Since It's a Purchase and Sale Transaction

Factoring is also characterized by its broad availability.  There are many hundreds of U.S. based factoring companies and that does not include the many banks offering this powerful financial tool as well.  What makes factoring even more broadly available to business owners is that one of factoring's most prominent characteristics is that it is a purchase and sale transaction and never a loan. 

Factoring finance is available to even small companies with little or no credit history.  This is because, as opposed to traditional lenders who would look for loan repayment from the borrowing business owner, factors look to the customers of that same business owner for payment upon their invoices.  This makes the creditworthiness of a business owner's customers much more important to the factor than the creditworthiness of the actual business owner needing working capital.

Requirements for a Factoring Relationship

For small business owners, setting up a factoring relationship through IACFB is very easy and there are only a few requirements:

  1. The invoices you factor must represent "true sales" and not be conditional in any way.
  2. The goods or services represented by your invoices must already be performed, completed, or delivered.  Factors do not provide contract financing and will not purchase "pre-ship" invoices.
  3. As a business owner, your accounts receivable cannot be pledged as collateral for a current business loan.  They must be free and clear.
  4. Your monthly invoice volume should be at least $25,000 although through IACFB, we can usually interest one of our factors regarding smaller businesses that exhibit high-growth expectations or opportunities.

How to Get Your Business Started With Factoring Through IACFB

Getting started with factoring is very easy and typically, you can be enjoying all of the benefits that factoring has to offer within just a few days of applying

Because much of the factoring industry is very specialized, finding just the right factor to service your company can sometimes be difficult...but not when using the services of IACFB.  With our expansive Directory of American Factors and Lenders, we can almost always find the right specialized finance company for your small business regardless of it's "niche" in your industry. .

Get Started Today!

You can get started today and receive a FREE proposal through IACFB by simply completing our short online application form.  Once received, you will be contacted by one of our courteous account executive / underwriters who will discuss your needs and requirements and provide you with the most suitable options to solve your growth and working capital problems.