Fast invoice factoring plus#

The bank or vendor may choose to extend credit based on your creditworthiness. They may request financial information on your customer to determine if they are a good credit risk before purchasing an invoice.Ī line of credit is based on reviewing your company’s financial statements and credit history. The factoring company looks at the qualifications of the invoice and your customer. Differences between factoring and a line of credit Qualifications needed Then payment becomes due along with interest on late payments. The credit delays payment for a certain number of days, depending on the terms of the agreement. Then, you purchase materials without paying upfront cash. The vendor will review your credit application and possibly financial statements, then decide how much credit to extend. Vendors can also extend a line of credit.

Fast invoice factoring plus#

Each month, you pay the balance you borrowed plus interest expense. If the line is granted, you continue to write checks on your account, and bank funds are transferred to cover them once you are overdrawn. It involves a credit history and financial statement review by the bank to determine if your company is a good credit risk. What is a line of credit?įor construction companies, there are two sources of lines of credit: banks and vendors.Ī line of credit from the bank is a loan that you take out only as you need it. Depending on your business situation, the drawbacks to factoring will often outweigh the benefits. Factoring companies investigate your customers and will only accept those that pay on time. Factoring is generally more expensive than a bank loan and includes fees for the factoring itself, administrative expenses, and wiring.įactoring is one way to get some cash fast if you have open accounts receivable that you know will be paid within terms - it is not a way to collect on late payments. The factoring company pays you the balance of the invoice less their fee, which is typically 1–3% of the invoice value.īut invoice factoring isn’t cheap, and that cost can fluctuate depending on the size of your business. Your customer then pays the factoring company the face value of the invoice. Once you get the cash, however, the factoring company owns the invoice. Typically, the factoring company pays you 70–80% of the invoice value right away. You get cash upfront and sell your invoices to a factoring company. Invoice factoring involves borrowing against your receivables. Differences between factoring and a line of credit.