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Factoring for businesses

Factoring for businesses

One of the quickest and easiest ways for your business to convert credit sales into cash is by selling the invoices that you have raised to a factoring company. While this method of financing is not practical for an enterprise that carries out retail sales, it is a perfect solution for a company that sells to other businesses and requires immediate cash against the goods that it sells or the services that it provides. Most business-to-business customers buy on credit. Payment terms could be fixed at 30, 60 or 90 days. But as the seller, you may require funds earlier than that, to meet your commitments to suppliers or to pay wages. A factoring company can provide an ideal solution. It will purchase the invoice that you have raised on your customer from you and, in exchange, pay you the invoice value reduced by its fees and a certain amount that it may hold back as a reserve. On the day that the invoice is due for payment, the factoring company will collect the invoice amount from your customer. It will then return any excess amount to you. The amount you pay as fees to the factoring company is, in effect, the interest that you are bearing for getting money instantly. The factoring company will usually charge you a processing fee and a factoring fee. The processing fee could be 3% of the invoice amount if the customer has a 30-day credit period. In addition, a factoring fee of 1% per week may be levied for every week that your customer delays payment.Of course, the final rates are subject to negotiation and would dependent upon the policies followed by individual factoring companies. Before using factoring as a means to manage your cash flows, you need to ascertain whether your business has an adequate gross margin to bear the cost that this type of finance entails. Many businesses are happy to pay the factoring company’s fees as it gives them urgently needed cash and helps them to meet their own financial obligations. Factoring should not be used by businesses that make sales on a contingent basis where the customer has the option to return the goods. It is also not advisable to sell the invoices that you have raised on customers who usually delay payments. This will result in higher factoring fees and eat into your profitability.

With over 500 business lenders, you are sure to find one that can help your small business get the money it needs to succeed. Most of the lenders work with all types of business lending options and are flexible with the amount you may be asking for. Most times you just need to fill out a quick and simple loan application and you could get your money in as little as 24-48 hours. It’s time to see what your business can do!

Accountable Capital Corp.

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(41 reviews)

1st American Factoring

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(0 review)

1st Choice Advance

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1st Independent Leasing, Inc.

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(0 review)

Aberdeen Funding, Inc.

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(0 review)

Access Business Finance

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(0 review)

Access Funding Center, Inc.

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(0 review)

Accountable Capital

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Advance Capital

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(0 review)

Advance Smart

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