What truly sets invoice factoring apart from other forms of commercial financing is the mechanism that allows a company to access working capital to grow their business. Although there are other unique benefits, not ending up with a long-term loan is a great deal.
Because with factoring, the decision to fund is based on the creditworthiness of the customer not you our client – we see each invoice as an individual transaction. Really, you are the one making the loan. You have completed the work and are waiting for payment from your customer. You gave them net term credit to pay within 30 days usually, so you are the lender.
What we do when factoring that invoice or loan is purchase the proceeds of the invoice, pay you right away and then we wait for the payment to come in from the customer. It is strictly used to access capital that is in your aging but not in your bank account.
Once the customer pays off the invoice, that transaction is retired and done.
So you see, your company never ends up with a loan and loan payments. There is no worry about how to pay off a note somewhere down the line. And that can be a nice way to relieve some of your stress.