How will they be treated? What if they pay me directly? What do I tell them? Here are some common questions and helpful answers.

I don’t want to sell all my invoices. Is that possible?

Yes. Most factoring companies will allow you to pick and choose which invoices to factor. Of course they must be ‘credit worthy” but the factor will help you decide which ones are in your best interest to sell.

Where do the payments get sent?

Your customers will mail payments directly to the factoring company. Any ‘reserve” will then be forwarded on to you.

What if the customer mails me the money?

This is common, especially on the first payment. Factoring companies will require you to forward them the check. In other words, you are not to cash it and write another check to the funder. This helps the factor keep track of each customer’s credit worthiness (as well as avoid fraud). Your clients will then be notified that they need to mail payments directly to the factor.

How do I know the factor will treat my clients well?

The factor is in business with you. They want you to succeed and continue to grow. They are not a collection company. They want to maintain your customer satisfaction just as you would.

What should I tell my customer? Will it look bad if I am factoring?

Odds are your client may already be familiar with the process and not really think anything of it. If for some reason they are not, you simply need to tell them that you have chosen to use an outside company to manage your account receivables.

Still looking for more information? Check out 5 Things to Know Before Applying for Factoring.

Well, this article is for you!

What is factoring?

Factoring is the sale of accounts receivables or invoices at a slight discount.

How does it work?

You set up an account with a Factor. Once set up, you send the new invoice to the Factor who then cuts you a check for the agreed upon percentage, referred to as the advance. Read More…

How much does it cost?

The factoring fee depends on the strength and performance of the accounts. For the most part the fee will be between 2-5%. Read more…

How long does it take?

Setting up an account can take 5-10 days. Once the account is set up an advance is typically funded within 24 hours of invoice submission.

Do I have to factor all my accounts?

Not unless you are looking for a ‘one time” shot. Otherwise you pick and choose which invoices you would like to factor.

How long do I have to work with the Factor?

There is no set time. The average business may factor for 2-3 years but some companies continue on indefinitely.

What if I have poor credit?

For the most part the factor is looking at the strength of the payer (your customer), not you or your business.

What happens if my customers don’t pay?

That depends on how you set up the transaction with the Factor. If it is ‘non-recourse factoring” then you may not be responsible. If it is ‘recourse factoring” then you will need to repay or replace the bad invoice. Read More…

What if I have a bank or tax lien?

Oftentimes the factor can work with the bank or tax entity to have them subordinate their position. If there are enough receivables you may even be able to pay off the loan or tax obligation. Read More…

How can I get started?

There are numerous great factoring companies right here at FactoringInvestor.com. We recommend that you ‘interview” more than one to see which company may best fit your needs. Read More…

What if I want to learn more?

There is a lot of great information on this site. There are also many in-depth resources available from a variety of authors. Check out the ‘Resources” section of FactoringInvestor.com. Read More…