Invoice Financing

What is Invoice Financing

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Invoice financing, also known as “Invoice Factoring” or “Accounts Receivable Financing,” is a type of financing that allows business owners to get cash quickly from invoices that they would otherwise be waiting 30, 60, or 90 days to receive payment for.

This type of business loan lets you as the owner finance purchase orders or outstanding invoices. A finance company, like AdvancePoint Capital, will advance a set amount of the unpaid invoice to the business owner and then collect directly from the client or customer for the unpaid portion.

Financing & Fees of Accounts Receivable Financing

Accounts receivable financing is a simple way for small business owners to free up future cash for the bills of today. Because there is less risk involved for the lender, the qualifications are easier, but there are still fees and restrictions.

How this type of financing works is based on a mix of processing fees and factoring fees. Here’s the math involved in a typical financing scenario:

Let’s say you have a $10,000 invoice with 30-day terms.

A financing company might immediately advance you 90% of that amount, or $9,000, and hold the rest, the $1,000, in reserve.

The next step happens when the invoice is paid. Say the customer pays the finance company two weeks later. After subtracting the 3% processing fee of $300, the financing company keeps its factoring fee of 1% per week, which in this example is 2% or $200, and then gives you the remaining balance from the $1,000 reserve.

Essentially, they charged you $500 out of the $10,000 invoice, you got the $9,000 up front, and you only had to pay $500 for the convenience. This is a great method for getting cash when your business is strapped in the short term, but you anticipate better finances in the long run.

Features of Invoice Financing/Factoring

Invoice financing and factoring have a lot of features and benefits that make them attractive to the average small business owner.

Through this financial product, you can finance up to 100% of the invoice amount to be advanced. After that, the finance company handles the collection of the payment from the customer or client, saving you the hassle and uncertainty of collecting it yourself.

When you need money quickly, this is perfect for you, too. You can receive the advance in your bank account in as little as one business day. The factor costs are nominal, typically from 1% to 3% of the invoice total plus other processing fees, depending on the company you work with.

The fast, convenient and straightforward way to get the money you need for your business – now! Get your Quote Today by filling out our simple form.

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What are the Qualifications of Accounts Receivable Financing?

Unlike traditional business loans, this product DOES NOT rely on the business owner’s revenue, profitability, time in business, or personal credit, which means those who may have otherwise had a hard time getting financing can still qualify for invoice factoring.

The invoices themselves act as collateral for the factoring company, so they are more focused on the one who owes the funds than they are on the business owner.

Generally, the company likes to see an average monthly account receivable ledger of $50,000 per month from the business owner, but some exceptions can be made.

Finance companies will be evaluating the creditworthiness of the consumer on the invoice, not the business owner getting the advance. The personal and/or business credit scores of the business owner does not matter, as the finance company will be focusing on the credit of who is on the bill and collecting payment from them.

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What is required to apply for Invoice financing?

This financing product is unique, as mentioned above, in that it’s easier to qualify for since the collateral is in the statement of charges and the person paying the lender back is the consumer, not the business owner. To apply and get approved, you must provide the following:

  • 1-page Application
  • List of names of business and contact info you are invoicing
  • Accounts Receivable Ledger
  • Actual invoices and their terms

Eligibility Requirements:

  • A simple one-page application
  • Paperwork
  • A/R and A/P reports
  • Credit
  • No Credit Checks for Business Owners

Basic Features:

  • A Line of Credit up to $2.5M
  • Receivables due in up to 90 days
  • Free up cash trapped in bills

This is a fast, convenient and straightforward way to get the money you need for your business – now! Get Your Quote Today by filling out our simple form.

Invoice financing can be a great tool for those business owners who charge customers and want to leverage that to get paid quicker for, in some cases, a nominal fee.

For many small business owners, this may be the only way to get a cash advance when they are in a pinch and need working capital or cash flow or if they have difficulty in getting other types of business loan products.

Check out How to find the Best Small Business Loans to weigh all the benefits and evaluate the decision to get funding for your business.

The fast, convenient and straightforward way to get the money you need for your business – now! Get your Quote Today by filling out our simple form.

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* All loans made by either WebBank, an FDIC-insured Utah industrial bank, or Bank of the Internet Federal Bank, an FDIC-insured federally chartered thrift located in California. In connection with the loans, the Banks' underwriting conditions and terms apply.