Qualify for Invoice Factoring - Analysis

Does my business qualify for invoice factoring?

Follow these quick checklists to make sure your company, sales and invoices fit the criteria so that you qualify for invoice factoring and get approved for more working capital.

Qualify for Invoice Factoring - Analysis

When the bank denies your loan, you 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.

Your Company

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

You don’t meet the standard list of requirements for a bank loan

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.

factoring industries

Your Sales

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.

Qualify for Invoice Factoring - Financials

 

Related: Need a bank loan? 16 ways factoring is better.

Your Invoices

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

factoring approval

There are plenty of advantages to using invoice factoring, aside from the obvious need for working capital. (If you’re 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. And 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.

 

Ready for help? Turn your open invoices into working capital with Liquid Capital’s Invoice Factoring Solution.

News release

COVID-19 Client update: Health and safety is top priority while Liquid Capital remains open for funding

COVID-19 update: Liquid Capital will continue to provide businesses with access to much-needed working capital.

Amidst the global COVID-19 pandemic, we are first and foremost concerned about the health and safety of all our clients, colleagues, referral partners, lending partners, and loved ones — and hope that you are safe and well supported.

Your business health and the continued operation of your organization is also vital. Our team is working diligently to continue to provide ongoing funding. Small and medium-sized businesses are the foundation of the North American economy, and we will partner together to get through this. 

As new and unexpected business challenges arise, having reliable access to working capital will no doubt be a crucial part of your planning and strategies in the coming weeks and months. Liquid Capital and its affiliates are well-capitalized, and our goal is to maintain ongoing operations without disruption so that you can receive fundings as needed.

Our Liquid Capital group, including the back-office and underwriting teams, will be making use of remote tools and communication methods wherever possible. As new funding applications come in, the team will process these in the order they arrive and as quickly as possible.

If you need business cash flow support, please reach out by email or phone at your convenience. We can provide information and the available options for you to access alternative financing when you need it most.

High growth companies highrise buildings

How high-growth companies can get unlimited cash flow

Your business is growing, and that means you need working capital. Here’s how high-growth companies can access virtually unlimited cash flow through smart financing strategies.

High growth companies highrise buildings

If you are leading one of the many small and medium-sized high-growth companies in North America, do not overlook this fundamental financial strategy that could offer you unlimited cash flow. ‘Invoice factoring’ could be the ultimate growth tool you’ve been searching for in your business.

A strategic financing option

Often, companies can use invoice factoring when bank loans or equity investments don’t pan out as planned. But savvy business pros look at this opportunity far more strategically. During periods of development and successful operations, high-growth companies need to access large amounts of capital – quickly and with assurance. Invoice factoring does exactly that – it frees up huge amounts of working capital, puts cash in hand, allows you take on new business and catapult your growth.

Here’s the 411 on factoring (but if you’re already in the know just skip ahead).

Invoice factoring, also simply referred to as factoring, is the process of selling your accounts receivables (customer invoices) to a specialized company (‘factor’) who will give you the majority of that cash up front. You’ll be able to use that capital for whatever purpose you need — instead of waiting the 30, 60 or 90 days you’d usually be stuck with. Once the factoring company collects payment for the invoice, they’ll release the additional funds to your company minus an agreed upon reserve fee. That’s it – you can continue to factor new accounts receivables to keep your working capital topped up and your high-growth strategy on target.

Related: Learn all the terminology in the Ultimate Factoring Encyclopedia.

These are the six key reasons growing businesses and high-growth companies should take advantage of factoring.

1. Quick application

High growth companies - Time

Factoring applications are relatively quick to complete since they focus largely on the accounts receivable in your business. The biggest requirement of factoring is that you must be generating regular and consistent sales from credit-worthy clients. Once your application is approved, you can have working capital delivered within 24 hours.

2. Cost efficient

It’s a common misconception that factoring costs can be prohibitive – while in actuality it can be a smart business decision. For businesses with healthy gross profit margins, the benefit from new sales opportunities will outweigh any costs associated with accessing working capital. Factoring can help you say ‘yes’ to new deals and dramatically increase revenue, which can also set you up for additional growth with expanded client relationships. But if you have to say ‘no’ to deals because the cash flow isn’t there, your bottom line will suffer.

3. Tailor made for high-growth companies

High-growth companies can hit a point where their financial needs can’t be met. Banks often cap their financing, especially when past results and financial history checks don’t match their criteria – and by their very nature, growing companies likely don’t have that history.

However, since factoring companies are focused on the quality of your accounts receivable, a growing company with legitimate invoices can continue to expand even without that prior history. Factoring companies look forward and up, so there are no limits to your financing potential. That means unlimited cash flow.

Related: Does my business qualify for invoice factoring?

4. Don’t give up control

high growth company

When growing your company, you likely don’t want to give up your ownership. Where venture capital deals often require that you sacrifice some of that equity, factoring does not. Your growing company stays in your control and ownership – so the more successful you are, the more you’ll fully reap those monetary rewards.

5. Work with banks

Choosing between bank loans and factoring isn’t necessary, as companies can work with multiple financing partners at the same time. In fact, many businesses will have a traditional bank loan for their base financing and then use a factoring partner as the business grows. Other companies will work with their factoring partner first to grow their business at a faster rate, and eventually, graduate on to add traditional bank financing.

6. Gain a finance partner

High growth companies Partnership

Factoring experts have great connections to other finance and business pros. They are business professionals who know that their success is also tied to your company success. This mutually beneficial partnership means you’ve gained a valuable colleague as part of the deal. It doesn’t stop there – as a well-established factoring partner can provide growing businesses with additional advice on improving payment terms, collections, areas for expansion and new sales opportunities.

If you’re a high-growth company ready for more working capital and unlimited cash flow, talk to us today and we’re happy to walk you through the application process or answer any questions.

Recourse invoice factoring

What is recourse invoice factoring?

Learn about the benefits of recourse invoice factoring and how it can offer you even more immediate working capital.

Recourse invoice factoring

For small and medium-sized businesses, there are many benefits to factoring your invoices. Instantly increasing your cash flow is, of course, the number one reason. But you can also benefit from outsourcing your back office support, letting your factoring partner handle collections on your accounts receivable. Freeing up much of your time, you’ll be able to work on other parts of your business.

There are a couple of different types of invoice factoring, and “recourse factoring” is the most common. So what is recourse factoring, and why should a business understand how it works?

How recourse factoring works

In recourse factoring, a funding partner (aka your lender or the “factor”) buys invoices from you with the agreement that you will buy the invoice back if your customer is unwilling or unable to pay for the invoice when it becomes due. In this way, you share the risk of non-payment with the funding partner.

There is a major advantage for you in recourse factoring. This shared risk allows your lender to advance a larger upfront percentage of the invoice. Typically in a recourse factoring arrangement, you can receive between 80 and 90% of the invoice upfront, minus the initial fee. 

And once the factoring partner receives payment for the invoice from your end customer, you’ll also receive a reserve payment.

Conversely, in non-recourse factoring you won’t have to share the risk, but you’ll receive less working capital than with recourse factoring. In fact, you may receive less than 75% of the face value of the invoice —  plus, you will not receive any reserves or holdback once the invoice is paid to the factoring partner. To a business in need of more working capital, this can be a severe disadvantage.  

The benefits of recourse factoring

  • You want to access more cash asap
  • You’re okay sharing a little bit of risk
  • You want to collect more money when the invoice is paid (which are the “reserves”)

How to work your funding partner

Find out what type of lending option your funding partner has available, and ask if they offer recourse factoring. It’s also important to discuss the lending terms and ensure their team has expertise and a proven track record. 

Factoring companies with excellent back office teams will also be able to help you improve your customer collections. Their experts are trained to spot businesses who are less likely to pay on time, and this can help you avoid non-payments and bad deals in the future. 

This is another big advantage of working with a high-quality funding partner, and should be an important consideration when deciding where to look for working capital.

 

Learn much more about factoring terminology in the Ultimate Factoring Encyclopedia. This free resource includes every definition you’ll need to know when applying for invoice factoring and securing working capital.

Factoring Encyclopedia eBook cover

 

Do you still have questions about recourse versus non-recourse factoring? Connect with us today!

Recent Fundings – March 2020