Invoice Factoring
Our clients experience many roadblocks while on projects. They want to plan for the expected and, in some cases, unexpected financial needs.
Our clients typically invoice their clients for services of products that they have utilized with a payment terms of 30, 60, 90 days. Therefore, the client has 90 days to pay for the services.
Meanwhile added expenses accumulate for our clients, and they do not want to wait 90 days to receive the full invoice payment.
Invoice funding is an advance on the invoice amount that can pay for payroll, equipment, and daily expenses for the business.
To take advantage of Invoice Funding, our clients must have:
- Current contracts that are being serviced
- Contact information for their clients
- Have a current contract
- Be able to transfer funds to a business checking account
Long story short:
Our clients are agreeing to sell their administrative duties (accounts receivable and accounts payable) to the Small Business Link (The Link). Once the contracts, services provided, and invoices are verified, our clients can be advanced a percentage of their invoice with a 24-72-hour period.
Process
Submit an application and sell the invoice.
Clients need to be approved. We will accept any company that has been in business for at least 2 years and doesn’t have any serious legal or tax problems. If approved, you will sign an agreement with The Link to establish the initial borrowed amount. The Link to set the advance will be determined based on the size of the transaction, your industry, and other risk parameters.
Step 1 Submit an application
The Link reviews several factors to see if you qualify. For example, we will review personal and business information, accounts receivable aging report, accounts payable aging report, tax returns, and corporate paperwork.
Step 2: Sell the invoice
Once your application is approved, we will establish The Link based on the size of your transactions, your industry, and other risk parameters. This will be the basis of your advancement agreement to sell the administrative duties of accounts receivables and accounts payable to The Link.
Step 3: The Link advances a percentage of the invoice.
Next, The Link will advance a percentage of the factored invoice, generally around 80%. The Link may also send a “notice of assignment” to the client who will pay the invoice.
Step 4: The invoice is due
Once the invoice is due, the client will pay the SB Link Directly (accounts receivable) rather than paying our clients directly.
Step 5: The Link transfers the remaining 20% of the invoice to your business minus fees.
After the client has paid The Link, The Link will send the rest of the remaining invoice amount, known as the remitted amount. The Link will subtract any fees, sometimes as low as 0.5% of the total invoice, depending on the accumulation time.
Benefits of Invoice Factoring
To get quick cash: Invoice factoring provides an easy and immediate cash source to cover expenses. Other financing options can take as long as 30, 60, 90 days, or more to complete.
Avoids more debt: Invoice factoring gives small businesses an alternative to credit cards and traditional small business loans.
Less of a credit risk: Invoice factoring has less of a credit risk than other business financing options. It relies on the creditworthiness of the customer, not your own business. Even businesses that don’t have the best credit can still qualify.
Conclusion
Invoice factoring helps businesses secure money quickly by selling unpaid customer invoices to cover expenses. As long as the customer pays the invoice on time, factoring represents a more affordable, short-term financing option compared to other alternatives.