Will my business qualify for accounts receivable factoring?
Using these quick checklists will help to make sure your company, sales and invoices are the right fit for accounts receivable factoring.
When the bank denies your loan, you have options. If you need extra working capital and your bank loan application has been denied, you still have options. Invoice factoring (also called “accounts receivable factoring” or just “factoring”) could give you the funds you need in a very short time – sometimes as quick as within one day. But first, make sure this option is right for your business.
If you fit into this list of criteria, you could be approved for invoice factoring.
✓ You’re a B2B company, whether you are a small business or startup, a growing operation or an established enterprise.
✓ Your company provides a service or sells a product to other businesses rather than private individuals.
✓ Your company doesn’t meet the standard qualifications for a bank loan or traditional funding options.
✓ Your company’s credit rating may not be very high, but your customers’ credit is,
✓ You operate in an industry that has reliable customers that pay on invoicing. See a list of common industries below.
✓ You have sales on the books with dependable customers who are credit-worthy.
✓ You invoice your clients on credit terms.
✓ You have strong sales opportunities in the pipeline.
✓ You have credit-worthy accounts receivable that are very likely to be paid on their due date.
✓ Your customer invoices tend to have longer terms such as 30 or 60 days from the invoice date.
✓ Your invoices are free of liens and encumbrances.
✓ Your invoices are within credit terms and credit limits.
Getting approved for invoice factoring
There are plenty of advantages to using invoice factoring, aside from the obvious need for working capital.
Ready to learn more? Get a headstart and learn all the factoring terminology in our free Ultimate Factoring Encyclopedia
Your factoring company can provide back-office support and take care of collections for those accounts receivable, freeing up time to focus on your company. You’ll also obtain more working capital that can be used to purchase additional supplies and fulfill new orders, helping grow your business at a faster pace. You can even save money by replacing early payment discounts with factoring to keep your cash flowing.
“Liquid Capital allows me to operate without stress. If a company is offering early payment discounts, factoring is a cheaper option to gain access to money.”
Dave Kip, CEO of Best Broadcast
By working with the right company, you’ll gain a business partner that can provide broader financial analysis and support – so the process can continue at a scalable pace to meet your business needs.
Read more: Should your business use invoice factoring services?