Improve Your Cash Flow
With Invoice Factoring
Outstanding invoices don’t have to slow your business down.
Invoice factoring provides fast access to working capital by converting unpaid invoices into cash, giving you greater flexibility to manage operations and support growth.
What Is Invoice Factoring?
Invoice factoring is a financial solution that allows businesses sell outstanding receivables to a factoring company for an immediate advance against the value of each invoice. For small and growing businesses, accessing working capital before customers pay creates more consistent cash flow and greater flexibility in managing day-to-day operations.
How Does Invoice Factoring Work?
A Straightforward Process
Invoice factoring isn’t complicated. Once a factoring agreement is signed, it is a simple 3-step process.
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1. Submit Your Invoice
Send your invoice to altLINE after billing your customer.
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2. Receive Your Cash Advance
Within 24 hours, you will receive 80-90% of the invoice value directly in your bank account.
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3. Payment Submitted to altLINE
Your debtor pays the invoice to altLINE. Once processed,
any remaining funds are released to your company, minus a small factoring fee (typically 1-5%).
Advantages of Factoring With altLINE
immediate working capital boost
Factoring stabilizes cash flow by reducing the impact of customer payment timing and improving financial predictability, with funding typically available within 24 hours to ensure consistent access to working capital when needed.
No More Tedious collections work
altLINE assumes collections responsibilities, meaning time-consuming back-office tasks like chasing down payments are lifted off your shoulders, giving you time back to focus on driving growth.
EASY ACCESS TO
debt-free funding
Factoring provides fast access to working capital without adding debt to your balance sheet. Compared to traditional loans, factoring typically offers a quicker, more accessible path to funding.
no minimum credit requirement
Unlike traditional financing options that often require borrowers to meet strict credit benchmarks, factoring focuses more on the creditworthiness of your customers, making funding accessible without a minimum credit requirement.
funds backed by
a bank
As a division of The Southern Bank Company, altLINE combines the speed and flexibility of factoring with the stability and financial strength of an established, secure financial institution.
BUILT TO SUPPORT GROWTH
As your business grows, so does your access to working capital. Because funding is based on your outstanding receivables, your available funding naturally increases as sales and invoices grow. This can help you maintain steady cash flow and take on new opportunities.
What Types of Businesses Benefit From Factoring?
Factoring helps all sorts of B2B businesses, including those with inconsistent cash flow, opportunities for growth, and immediate working capital needs.
Factoring Rates & Fees
How Much Does Factoring Cost & What Dictates Rates?
Invoice factoring rates typically range from 1-5%, but the actual cost depends on several factors. Pricing is often based on the creditworthiness of your customers, the amount of funding needed, the size and age of your invoices, and whether you finance all invoices or only select ones.
While factoring does slightly reduce margins on paper, businesses often weigh that cost against faster access to cash and the operational benefits that come with outsourcing receivables management. Understanding how the fee structure works upfront is important so that there are no surprises as your invoices age.
Creditworthiness of Your Debtors
Factoring costs are typically lower when your customers have a strong history of paying on-time because the factoring company is taking on less collection risk.
Average Monthly Borrowing Volume
Businesses that factor a higher volume of invoices may receive lower rates since larger volumes can make the relationship more efficient and predictable for the factoring company.
Average Age of Factored Receivables
More current receivables lead to lower costs because they are viewed as more likely to be collected quickly, while older invoices can increase fees.
Percent of Total Ledger Being Factored
Factoring a larger share of your total accounts receivable may help you qualify for more favorable pricing because it creates a broader and more consistent financing arrangement.
Factoring vs. Other Common Financing Solutions
Business owners exploring ways to improve cash flow often compare invoice factoring to other financing options. Understanding how these funding solutions work can help you determine which option best fits your company’s needs and growth goals.
- Merchant Cash Advance: A type of loan that is typically repaid through daily or weekly withdrawals from your business bank account.
- Short-Term Business Loans: A lump sum of capital that is repaid over a fixed term through scheduled payments.
- Invoice Financing: Receivables-based financing in which, unlike factoring, invoices act as collateral against a loan with the business retaining ownership of all AR.
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|
Invoice Factoring
|
Merchant Cash Advance
|
Short-Term Loans
|
Invoice Financing
|
|---|---|---|---|---|
|
Based on unpaid invoices
|
Yes
|
No
|
No
|
Yes
|
|
Provides fast funding
|
Yes
|
Yes
|
Sometimes
|
Yes
|
|
Creates debt
|
No
|
Yes
|
Yes
|
Yes
|
|
Funding grows with sales
|
Yes
|
No
|
No
|
Yes
|
|
Requires good credit
|
No
|
No
|
No
|
Sometimes
|
Industries We Serve
No matter the industry you’re in, factoring receivables can play a role in stabilizing your cash flow. We most commonly partner with B2B companies in the following industries:
Years
in Business
$1B+
in Factored
Invoices
A+
BBB
Rating
Why Choose altLINE
A Reliable Partner
As a bank factoring company, we offer direct funding without the middleman, unlike independent factors that source funds from third-parties. This allows us to reduce costs and pass those savings to you.
- Easy Approval
- Low Rates
- 100% Transparency
- FDIC insured
Frequently Asked
Invoice Factoring FAQs
What do you need to qualify for factoring?
Qualifying for invoice factoring is generally more straightforward than applying for a traditional business loan, but there are still a few requirements.
Most factoring companies will ask for unpaid invoices, clients with strong payment histories, a completed application, an accounts receivable aging report, a business bank account, a tax ID number, and personal identification. Since approval is largely based on the strength of your receivables, creditworthy customers play an important role in the process.
What are the disadvantages of factoring?
While invoice factoring offers fast access to working capital, there are a few tradeoffs to consider.
Since factoring involves selling invoices at a discount, your profit margins on those invoices may be slightly lower.
Businesses should also review agreements carefully to avoid hidden fees from less reputable providers.
Additionally, unless you’re working under a non-notification arrangement, your customers will typically be notified that a third party is involved in collecting payment. For many customers, this is no issue, but certain customers may initially be wary of shifting payments to a factor.
Are factored receivables subject to taxes?
Whether factored receivables are subject to taxes depends on how the transaction is structured and how the funds are treated for tax purposes. The IRS evaluates several factors when determining tax treatment, particularly to ensure businesses are not using factoring arrangements for tax avoidance or improper income transfers. Because tax obligations can vary by situation, businesses may benefit from consulting a tax professional for guidance specific to their circumstances.
Do I have to give up equity with invoice factoring?
You do not need to give up equity with invoice factoring, which is one of the many benefits of this type of financing. With invoice factoring, you receive a cash advance by selling your unpaid invoices, meaning you fund your business while keeping equity and avoiding taking on debt.
How can I use the business funding that I get from altLINE?
The financing you receive from factoring your invoices with altLINE can be used to cover a variety of expenses. You can use the working capital you receive to purchase new inventory or raw materials, pay your vendors, hire more staff, cover payroll, fund new contracts, bolster your marketing efforts, and scale your operations.
What is the difference between a bank and independent factoring company?
Both bank-owned and independent factoring companies provide funding by advancing cash against unpaid invoices, but there are important differences between the two. Independent factors often rely on outside funding sources, which can sometimes lead to higher costs or less oversight. Bank-owned factoring companies fund invoices directly and may offer added benefits like competitive rates, greater regulatory oversight, and an easier transition to other financing options in the future.
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