Factoring is a type of alternative financing that is not as well-known as traditional bank financing. Here are some common questions about factoring:
How does factoring differ from a bank loan?
At the highest level, factoring is a sale of accounts receivable in exchange for immediate cash. A bank loan is a debt that involves borrowing a specific amount of money for a fixed term and with set repayment terms.
What are the costs and fees associated with factoring?
Sky Business Credit charges a straightforward discount fee, starting between 1.5-3% of the amount of the invoice. Fees depend upon a few factors, such as the size of the account, whether the customer has monthly minimums for factoring or none, the industry the business is in, and the length and flexibility of the contract. With Sky, there are no additional fees, monthly or otherwise.
Are factoring fees deductible?
Yes. Factoring fees can be deducted as a business expense.
How long does it take to get funded through factoring?
It’s almost immediate. From application review to finalizing legal documents, the process can take as little as 24-48 hours.
Can I still factor if my business has poor credit?
Yes, you can still factor if you or your business have poor credit. Sky doesn’t care about your personal credit score. We care about how creditworthy your customers are.
How does the factor evaluate my customers’ credit?
Commercial credit reporting agencies are used such as Dunn & Bradstreet and Cortera. If your customer has a track record of on-time payments, we can almost certainly work with you.
Can I factor invoices that are already past due?
It depends. We will discuss your immediate cash flow needs and maximize your initial funding with the outstanding invoices. If the invoice is past due, we’ll verify the invoice and when it’s going to be paid to determine your funding options.
Will factoring impact my relationship with my customers?
This is a top concern of many businesses. The truth is, customers are used to paying invoices through outside third parties—they don’t care who is listed on the invoice! In addition, we’re professionals at managing and collecting receivables and we try to be as least intrusive as possible.
If you have other questions about factoring, we want to answer them! Reach out to talk.