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Is Invoice Factoring Right for Your Business?

January 10, 2023

Invoice factoring is a great way to improve cash flow without incurring additional debt. But how do you determine if factoring is right for your business? The questions below will help you make this determination.

What type of customers purchase from you?
    1. Other businesses
    2. Individual consumers
    3. Both businesses and individual consumers

For an invoice to be available for purchase by a factoring company, the invoice must be issued to another business. Factoring companies don’t purchase invoices issued to individual consumers. If your business sells to other businesses and individual consumers, for example a company that sells direct-to-consumer but also distributes products to other retailers or distributors, you may be able to factor the portion of invoices you issue to other companies. The factoring company can help determine if the business-to-business (B2B) portion of your business is large enough to warrant a factoring relationship.

How do you bill your customers?
    1. You issue invoices
    2. You receive payment in advance or cash-on-delivery

If you do not issue invoices to your customers, there is nothing for the factoring company to purchase. Therefore, companies that receive advance payment or cash-on-delivery have no invoices to sell to the factoring company.

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How do your clients typically pay?
    1. By check
    2. By ACH or wire
    3. By credit card

Checks, ACH and wire payments are all payment methods accepted by factoring companies. Credit card payments cannot be accepted by factoring companies because the credit card networks (American Express, Discover, Mastercard, Visa) dictate that credit card payments can only be accepted by the original product seller or service provider.

How long does it typically take for you to receive payments from your clients?
    1. Less than 30 days
    2. 30-59 days
    3. 60-89 days
    4. 90+ days

Invoices that pay under 90 days are eligible for factoring. Invoices more than 90 days old typically are not eligible for factoring, but the factoring company can work with your customers to get payment faster, making those invoices eligible.

As you can see, if you are invoicing businesses, that pay by check, wire, or ACH, in under 90 days, then your company should be able to take advantage of invoice factoring and Commercial Funding Inc. would love to help you get started.

Now that you know that invoice factoring is a good fit for your business, learn how invoice factoring can help with cash flow.

invoice factoring benefits


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