How do they work out the fees and upfront money?
There are several things they look at:
The fees are typically between 2-5 % of the total invoice. So, if you have a $1,000 invoice, a 3% fee would be $30.
What does 'advance' mean?
That's the money you get straight away when they buy your invoice. When your customer pays the invoice, you'll get the rest of the money. The upfront money is usually 60-95% of the total invoice. For example, with an 80% advance on a $1,000 invoice, you'd get $800 upfront. Once your customer pays, you'd get the remaining $200 minus the fee.
Why is selling invoices more expensive than a bank loan?
Even though selling your invoices can look pricier than a bank loan at first, there are a few things to keep in mind.
Isn't 3% a month too high? That's 36% a year!
Sure, the numbers can seem big if you compare them to a yearly bank interest rate. But it's not the same. Bank loans are one-time deals with yearly interest. We're buying your invoices at a reduced rate, which is a different thing. Plus, we keep giving you money, unlike a bank that only lends you money once.
For example, let's say you get a $100,000 loan from a bank with 12% interest. You'll get $100,000 once and have to pay $1,000 every month in interest. But, you'll still owe the bank $100,000. With us, if you sell $100,000 worth of invoices every month for a year, you'll get $1.2 million. If we charge 3% per month, you'll pay us $36,000 in a year. But, at the end of the year, you won't owe us anything.
My business only makes 3% profit. How can I afford to pay you 3%?
If your business only makes a 3% net profit, selling your invoices can actually help. By getting money faster, you can do more business without your costs going up too much. So, even though you'll pay us, your profits should go up because you'll be doing more business.
Let's do some math to show what could happen if you double your sales.
Without Selling Invoices:
Monthly Sales: $50,000
Cost of Goods Sold: $30,000 (60% of Sales)
Monthly Profit: $20,000 (40% of Sales)
Fixed Costs: $10,000
Variable Costs: $8,500 (17% of Sales)
No Invoice Sale Fee
Total Costs: $18,500 (37% of Sales)
Monthly Net Profit: $1,500 (3% of Sales)
With Selling Invoices:
Monthly Sales: $100,000
Cost of Goods Sold: $60,000 (60% of Sales)
Monthly Profit: $40,000 (40% of Sales)
Fixed Costs: $10,000
Variable Costs: $17,000 (17% of Sales)
Invoice Sale Fee: $3,000 (3% Fee)
Total Costs: $30,000 (30% of Sales)
Monthly Net Profit: $10,000 (10% of Sales)
But don't I only get 80% of my money upfront?
Let's say you sell $100,000 worth of invoices in January and get $80,000 upfront. You'll also pay a 3% fee ($3,000) and a 17% reserve ($17,000). Then, in February, you sell another $100,000 worth of invoices. You'll get another $80,000 upfront, plus the $17,000 reserve from January (assuming your customers pay in 30 days). So, in February, you actually get 97% of your money, not 80%. After the first month, you'll basically be getting 97% of your cash flow.
What if my customers take more than 30 days to pay?
You have a few options if your customers take longer to pay. You could wait 30 days before selling those invoices, so you only pay the 30-day fee. Or, you could sell the invoices of customers who pay faster first to get the cash you need.
We relieve your headaches and stress of collecting on accounts receivables.
You have 24/7 account access 365 days a year.
When you call, you get to speak to a real live person.
Don't wait long periods for a loan. Many of our factoring deals can take place in as little as 24 to 48 hours. If you need capital right now or are looking to expand then factoring is the way to go. We work on your time instead of you working on a bank's schedule.
If you need cash and you're sitting on a lot of unpaid invoices then factoring with us is the way to go. We'll give you the cash that your business needs and collect from your customers.
Debt is risky while at the same time being beneficial to growing a business. Start-ups can relieve themselves of the risk of debt and still create capital with factoring.
If you're a start-up or your business has a poor history or credit then you can still get the cash that you need. Today's banking atmosphere makes it a challenge for even the most-qualified businesses to get a loan. Factoring takes care of all of that.
Without a collections department or a small staff, collections often come down to you doing all of the leg work. Our Factoring Service will alleviate that burden and provide the service that you're not equipped to handle.