Accounts Receivable Factoring, also known as factoring, is a program in which a company sells its invoices, purchase orders or contracts to a private bank or financial institution. These entities specialize in buying receivables at a discounted rate.
Factoring is a type of asset-based program that allows businesses to free up unpaid incoming receivables. This financial tool helps you receive up to 90% of all receivables coming in the next 120 days. It is an excellent way to put money back into your business.
The cost of the factor depends on whether it is recourse factoring or non recourse factoring. Factoring companies usually charge a lower rate for recourse factoring. In the case of a non recourse factor, the lender is bearing all the risk of bad debts so a higher rate is charged to compensate for the risk. With recourse factoring, the business selling its receivables will most likely have some liability to the factoring company, if some of the receivables prove noncollectable.
Our factoring programs are far less restrictive than your local factoring institutions. The requirements needed are as follows: