Invoice factoring, also known as accounts receivable factoring, is an innovative funding source for small and growing businesses that need immediate cash flow to meet payroll, pay suppliers, buy new equipment, or expand the company. Whereas a bank lends you money, a factoring company buys your invoices as a discount and fronts you around 75% of the money. Then, they collect from your customers and pay you the remaining amount, minus a small factoring cost.
Ralph Johnson of American Growth Funding finds many businesses believe a common misconception about invoice factoring— they think it’s for failing companies, when in fact, it’s quite the opposite. Factoring is for rapidly growing companies. With factoring, the amount of capital a business can receive is directly linked to its sales. As previously described, factoring firms don’t lend money; rather they by your invoices at a discount. So, if you’re not selling, you have no invoices to buy.
However, factoring companies like American Growth Funding work with companies that don’t qualify for a traditional loan but have credit worthy customers that make timely payments. To learn more about invoice factoring and other innovative finance solutions for your business, please visit www.americangrowthfunding.com.