There are essentially 7 steps to factoring. They are as follows:
- Your business provides a product or service to another business or government entity
- You invoice your customer for the product or service rendered
- You sell the invoice to a Factor. An advance is given, usually within 24 hours via electronic bank transfer, bank wire, or check
- Your customer sends the payment for the invoice to the Factor
- Factor receives payment, then keeps amount advanced plus a fee
- Factor pays rebate/remaining amount to you.
- Repeat
Factoring is not a loan with interest due, but rather the purchase of an asset at a discounted rate from the face value of the asset. Factoring clients are not paying an interest rate as they would with a bank loan, just as they would if they were giving terms to a customer for early payment. In this way, you have much greater control over your monthly financial statements. You choose how many invoices to sell each month based on your needs. With a bank loan or credit advance, you pay the bank interest each month regardless of how your business is doing.
If this sounds like something that may be of interest to your company, contact us for more information. http://www.sscapitalpartners.com
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