Signing a Factoring Contract

What is a Factoring Company?

If you’re considering various financing options to boost working capital for you business, one of these may be invoice factoring. This article helps you understand what a factoring company is, and how they could help you.

For a more complete overview of invoice factoring, check out our full invoice factoring guide.

What Does a Factoring Company Do?

A factoring company is a financing partner who helps businesses in need of faster cash flow. These businesses typically face timing challenges of slow-paying customers or need funds to ramp up growth. Factoring companies come in many varieties – independent financiers, financial institutions and multinational corporations to name a few.

Each factoring company has its own way of doing things, but they all share the common function of purchasing a business’s accounts receivable (AR). A business’s receivables represent goods or services already produced and delivered to the buyer. Because these receivables have value, factors are willing to purchase them, then collect directly from your customers for a small fee.

Why Wouldn’t I Wait for My Customers to Pay?

When you’re trying to grow your business, you often need steady, predictable cash to pay bills, make payroll or invest in other capital. This can be tough if you’re always waiting 30-90 days from when you send an invoice to collect from your customers. Cash flow then becomes unpredictable and often comes in after you need it most.

When you factor your invoices, you’re only waiting on the remaining 10-20% of the invoice amount – the rest is delivered up front. If you know when you’re going to bill your customers, you know exactly when you’ll get your cash. Factoring receivables allows you to let the factoring company wait on payment while you put the cash to work in the meantime.

Which Factoring Company Should I Choose?

Choosing the right factoring company is critical – making the wrong decision could cost your business significant time and money, making your cash flow problem worse. Banks are different than traditional or independent factoring companies. Unlike the latter, a bank is a direct source of funds, not a middleman. Find our more information about the difference, or review the helpful infographic below.

Invoice Factoring with a Bank

How is altLINE different than other factors?

At altLINE, we stand by 100% transparency. We’re a regulated bank that’s been in business since 1936 – we believe in helping our customers grow, and doing it in a trustworthy and honest manner. We want you to ask questions, carefully review your options and decide what’s best for your business.

If you’re ready to speak with a sales representative, or simply get more information, please contact us at (205) 607-0811 or request a free quote.