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How Does Factoring Work? – Franklin Capital Video

How does factoring work?

Before we talk about how factoring works, let’s first talk about what is accounts receivable financing?

Having the working capital available when you need it can be a challenge for many businesses. The financial obligations of your business can’t always wait the 30 to 60+ days it takes your customers to pay their invoices. So, what options do you have? You can turn to your local bank, but unfortunately, far too many businesses are turned down for working capital assistance, and that is after the often lengthy and time-consuming process.

Fortunately, another option for businesses of all sizes and stages is accounts receivable factoring. With this type of financing, you get paid quickly for your unpaid invoices. The application process is quick and easy.

So how does factoring work?

Step 1: Your company provides goods or services to your customers.

Step 2: You submit an invoice to your customer, like you usually do, and then submit a copy to a factoring company, such as Franklin Capital. It is also helpful to submit backup documents such as purchase orders, time sheets, and any proof of delivery. This invoice will notify the customer to pay the factoring company directly.

How factoring works

Step 3: Your account manager verifies the invoice with your customer.

Step 4: Once verified with your customer; you get up to 95% of the invoice value, less the expected fees. This is often through an ACH or wire transfer, usually on the same day you submit the invoice.

Step 5: The factoring company waits the 30 – 45+ days to get the payment from your customer.

Step 6: Once the factoring company receives payment from your customer, you will receive the balance between the invoice value and funds already provided to you minus the reserve and factoring fee, typically .5% – 1.5% of the invoice value per month that the invoice is outstanding.

Accounts receivable factoring is that easy and helps you budget your expenses since you won’t have to wait for the customer payment for funding.

A significant benefit of factoring with Franklin Capital is that you get a dedicated account manager. That person becomes an extension of your team and will monitor your receivables to help ensure timely payment, which frees up your staff from having to manage the collection monitoring. Our online system also allows you to view payment and invoice details in real-time when you need to, as well as the ability to pull off reports and upload the invoices straight from your system to ours.

If your business could benefit from knowing when you will be paid, call us at (847) 579-4780 to learn more about how accounts receivable factoring can help improve your working capital.