Invoice Factoring Accounts Receivable Financing: What it is & how it works

Invoice Factoring - Unlock Working Capital With Accounts Receivable Financing

Invoice factoring finance tools (accounts receivable financing) let you unlock the working capital tied up in unpaid accounts receivable invoices the same day an invoice is generated.

Invoice Factoring Accounts Receivable Financing

How Invoice Factoring Finance Works

What accounts receivable financing is, and how invoice factoring works

Accounts receivable financing is the practice of factoring invoices. It involves three parties: an organization that sells on terms to customers, their client, and the invoice factoring finance company. The organization fulfills an order or completes a service for the client, and generates a client invoice. They factor, or sell, the invoice to an invoice factoring company on the same day, and get an advance on the invoice amount. In exchange, the factoring company earns a small fee (called a factoring fee).

The client still enjoys the ability to pay 30-45-60 or even 90 days later, but the organization gets paid right away, through accounts receivable invoice factoring. Here’s an example of how the invoice factoring accounts receivable financing process works assuming a 98% advance rate and 2% factoring fee:

Day One -

Generate a customer invoice of $100,000
Sell the customer invoice to an invoice factoring company
Get a same-day advance of $98,000

Day 30-45+

Customer remits payment for the invoice
Accounts receivable financing company receives repayment of $98,000 plus the 2% financing fee ($2,000)

Invoice factoring accounts receivable financing is a debt-free form of business financing. Rather than getting money through bank loans, lines of credit, or even higher interest credit cards, an organization is able to speed up the cash flow of their own receivables. Instead of waiting weeks or months chasing customer payments, the organization can get paid on the same day they generate a client invoice.

A/R invoice factoring is a business financing tool commonly used in many B2B industries in the USA, and has been used worldwide for hundreds of years. You’ll also find it commonly referred to as:

accounts receivables financing (a/r financing)
accounts receivable factoring
invoice financing
invoice factoring or receivables invoice factoring

A/R Financing Calculator

Invoice Factoring Calculator

An invoice factoring calculator (also known as an accounts receivable factoring calculator or opportunity cost calculator) enables you to see how much working capital you could unlock using receivables financing, instead of waiting for a customer to pay. Our calculator is designed to show these numbers at an individual invoice level, based on your average invoice amount.

For instance, let’s say that your customer invoices range anywhere from $25,000 - $250,000, but come in on average around $140,000. Enter $140,000 into the invoice factoring calculator and you’ll see that (assuming an advance rate of 98% and 2% factoring fee):

Receivables financing provides immediate access to $137,200 of the invoice amount
The financing company earns a 2% financing fee

You can experiment with your own average invoice amount below, or enter your total outstanding accounts receivable amount to see how much working capital you may be able to unlock immediately using receivables financing. Then request a completely free, no-obligation quote and we’ll source invoice factoring companies on your behalf with no application or due diligence fees.

What Factoring Brokers Do

Working with Invoice Factoring Brokers

As accounts receivable factoring brokers (also called invoice factoring brokers, business brokers, or A/R factoring brokers) we work as a third party to help you find and evaluate the best invoice factoring companies. Our team has more than a decade of experience working in a factoring company in addition to helping broker receivables financing agreements.

As factoring brokers, we leverage our industry knowledge and connections to help you:

Get and evaluate invoice factoring proposals
Negotiate better terms to maximize benefits and minimize costs
Vet new customers and get customer accounts approved for factoring
Tailor receivables financing agreements to the unique needs of the client’s business
Locate invoice factoring companies for micro factoring and small-ticket invoices (generally $20,000 or less)
Find niche accounts receivable financing services, such as spot factoring

At no cost to you as the client.

Working with us doesn’t cost you more but it could help you find the best invoice factoring companies to work with - one that sees their role as a financing company invested in the growth and success of your business. Working with us can also help you obtain a factoring agreement that is tailored to the needs of your business instead of a one-size-fits-all accounts receivable financing approach.

Apply online (fastest process) or request a free, no-obligation quote; either way, we will then,

Source potential invoice factoring companies and accounts receivable financing agreements that match your business’ priorities and needs
Ensure you’re presented with offers and help negotiate on your behalf (often behind the scenes)
Continue to work with the factoring companies to make sure your business financing needs are being addressed

Get a free, no-obligation quote:

Invoice Factoring Rates

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In accounts receivable financing, invoice factoring rates refer to the amount that is advanced to you as the factoring client (the advance) as well as any amount held in reserve against customer payment of the invoice (the reserve, or holdback) and the amount earned by the invoice factoring company (the factoring fee).

As accounts receivable factoring brokers, we view our role as your advocate. Our job is to help you find the best factoring solution for your organization. This entails programs that go beyond low factoring fees and high advances, with terms such as:

Factoring fees as low as 1-2%
Competitive advances as high as 98%
Fast funding - same day funding on approved invoices
Long or short term contracts to save you money and keep you in control
No factoring minimums
No hidden costs
No application or due diligence fees
Free credit checks on new customers
Consistent, professional customer service
Niche business financing tools like spot factoring, micro factoring, small invoice factoring, and so on

Even if you’re already factoring, we would be happy to provide you with a free, no-risk quote so you can be sure you have the factoring finance program in place that is best suited to the unique needs of your business.