The factor advances funds against invoices and collects money owed by the business clients. The factor manages invoices and implements credit reviews of the clients for the business. It establishes steady cash flow and eliminates the 30, 60, 90-day waiting period for the accounts receivable of a business. Benefits of Factoringįactoring is not a loan thereby no liability is reflected on the balance sheet. After the client pays the invoice, the factor pays the business the remainder of the money collected and keeps back a transaction fee.Īs a bank factoring company, altLINE offers various accounts receivable financing structures to fit the varying needs of a business. The factor gives the business a percentage of the total value of invoices and collects invoice payments from the business’ client. Invoice factoring is the third method, in which a business sells invoices to the third-party (the factor).This structure operates similarly to a line of line of credit. The third-party processes the invoices and the business receives funds based on the expected money due from their client (the debtor). independent factoring company or a factoring bank) at a discount. In accounts receivable financing, a business sells the value of its invoices to a third-party factor (ie.Since asset lending is similar to a revolving line of credit, the business can borrow from assets on a continual basis to cover expenses as needed. The collateral is either the inventory, accounts receivable or balance sheet assets. The first is asset-based lending which is a loan secured by business assets.At altLINE, we break out our receivable-based products into three structures: Each provider has its own way of defining the types of factoring available. There are many nuances and differences between traditional financing companies and banks that offer factoring. A bank factoring company uses the same steps as a traditional factor but requires the factor to be a regulated bank. Depending on the arrangement, the cash is either discounted or reduced by fees charged by the factor. A business can use its invoices (accounts receivable) as leverage or sell off accounts receivable to the factor to obtain cash. What is a Bank Factoring Company?įactoring is a transaction between a business and a third-party (the factor) which provides quick cash flow in exchange for accounts receivable and/or other assets. There are tons of different providers to choose from – so how do you know which is best? This article helps describe the differences between an independent factor and a bank factor, and why one may offer more advantages for your business than the other. If you’ve already determined that invoice factoring is a good fit for your business, the next step is to identify the best factoring company for you.
0 Comments
Leave a Reply. |