Take Control of Your Cash Flow: How Factoring Works

October 12, 2023 | Blog

 

Running a successful business comes down to a few key factors; the most important one is cash flow. Factoring is a type of alternative financing that allows you to take control of your cash flow by selling your accounts receivable to a third party (also known as a factor) to obtain immediate working capital. Now, instead of waiting for your customers to pay based on 30-, 60-, or even 90-day terms, you get cash immediately, and the factor collects the payment later.

How Factoring Works

The factoring process is straightforward and simple:

1. The business sells its product or service to customers.
2. The business issues its invoices to the customer and copies Sky Business Credit (“Sky”).
3. Sky verifies or validates the invoices with the customer (when applicable).
4. Within 24 hours, Sky advances 80-90% of the invoice amount.
5. The customer sends payment to Sky when due.
6. As Sky collects, we return the remaining 10-20% to you, minus our small fee.
7. You sell more products or services and send your invoices to Sky, continuing the cash flow cycle

Most importantly, with a more reliable – and accelerated – cash flow, it becomes much easier for your business to grow!

Other Things to Know About Factoring

Factoring is fast

The funding process can take as little as 24-48 hours, from application review to finalizing legal documents.

Your customer’s credit is the focus, not yours

Have no credit or poor credit? Sky doesn’t care about your personal credit score or how long you’ve been in business. We care how creditworthy your customers are.

Factoring is flexible

You don’t have to factor invoices for every customer. It’s adaptable to your business’s unique needs, and it can scale with your business. We’ll grow along with you!

Ready to Factor?

If you’re ready to factor, we offer an easy 5-step approval process:

Step 1: Complete a free, no-risk application

Step 2: Sky will issue you a proposal of terms, that includes pricing and other terms of your credit facility

Step 3: Review and sign the proposal

Step 4: We’ll request a few additional documents from you so that we can do our due diligence on your customers

Step 5: Funding is finalized!

Sky Business Credit can move as quickly as you need. Please reach out to learn more about factoring and discuss if this financing is a good fit for your business.