Damex Trading is a premier, and trustworthy, invoice financing company. We can help you turn unpaid customer invoices into quick cash loans with invoice factoring and invoice financing. Invoice factoring is fast, simple, and a debt-free way of getting financing. For instance, companies who cannot wait months, or weeks, for payments. Invoice factoring is very simple, and straightforward.
Factoring product companies
Companies who use factoring typical provide a product, or service, to their customers. However, when it’s time to invoice the customer, the company will send the invoice to the factoring company. Our invoice factoring company will advance the company of the value of the invoice.
Instead of paying interest, the cost of factoring inother words bases on how long it takes your customer to pay your invoice. Factoring fees are also based on things like the dollar volume of invoices factored, credit, and payment history, of your customers and the expected payment terms.
What are the benefits of invoice factoring
Instead of waiting many weeks to get paid on your invoice. You can get an advance on those funds fast. Which means you get immediate cash for business expenses you have. For example, you can use the funds to pay for payroll, supplies, repair, expansion, anything.
HOW IT WORKS
There are three parties involved in an factoring scenario.
After you deliver your product or service to the customer, an invoice is also issued. The company sells the invoice to the factor (Damex. In return for the advance, the company gets anywhere from 70-90% of the value of the invoice. After the debtor pays the invoice, the business gets the rest of the funds. Minus a fee which is also based on the terms and value of the invoice. In the end, all three parties enjoy from factoring.
Benefits of Factoring
1. Provides you with immediate cash.
2. It is also based on your customers’ creditworthiness.
3. The transaction is simple.
4. It doesn’t drive you into debt.
5. You don’t have to wait for customers to pay.
Factoring Process
Invoice factoring is a simple process. A business first enters into an agreement with a factor. The business then creates invoices as normal. Thus, instead of sending invoices to customers, it sends them to the factoring company. Once it has assessed the invoices, it transfers a cash advance to the firm’s account within 24 hrs. The advance is 90 percent of the invoice. Once the customers pay, the factoring company subtracts a factoring fee. And then sends the balance.
Steps You Should Follow in Factoring.
1. Bill as normal.
2. Send your invoice to
3. Receive cash advance from factor.
4. Your customers remit payments to the factor.
5. Factor sends the remaining balance after charging a small fee.
Relationship
The relationship between a business and a factoring company is also based on a factoring agreement. The agreement contains the terms of engagement between the factoring company and the client. The terms include ;Length of service, Advance rate, the volume of commitment, Fee/factoring discount.
The Length of Service
The lengths of factoring contracts vary. Some contracts last for only three months, some go for six months and others cover many years. You should always seek clarity on the length of service before you get into any factoring agreement.
Advance Rate
Most factoring companies advance you at least 70 percent of the total invoice amount. The amount of cash sent is also based on variables. Like customer’s creditworthiness volume and paying trends.
Factoring Volume
Most factoring agreements stipulate the volume of commitment. To get the best terms for your business. Low factoring fees and high advance rates. You can commit to factor an agreed volume of invoices.
Factoring Fees
Factoring fees vary based on volume, size of invoice, customer trends, industry
Types of Invoice Factoring Companies
to enjoy an empowering factoring engagement, you need to find the right partner. There are so many factoring companies out there and finding the right one can be difficult. A factoring company should meet your cash flow needs. And also offer you other value-adding services.
Generalists’ vs Specialists
Businesses in several industries use factoring services. While some factoring companies specialize in specific industries others serve many industries.
Factoring companies with clients across many industries are also called factoring generalists. Generalists have client portfolios that span several industries. Small businesses make a majority of their clients.
Recourse vs Non-recourse
Non-recourse factoring companies are not very common. A lot of factoring companies tout themselves as non-recourse. In reality, their contracts list a myriad of reasons why your invoice should be exempt. Non-recourse factoring companies take all the credit risks that come with the collection of your invoices. That is why they charge higher fees.
Business invoice factoring
Owning a business is rewarding, but it comes with risks. One of the most common issues business owners face is cash flow due to delays in account receivables. Regardless whether your invoices are unpaid due to a slow paying customer/ disputes. Your cash flow is important. Even when you have cash flow issues, you still have expenses like insurance, utilities and payroll. If you don’t have enough cash to fill the void between bills and income. Then you may want to consider business invoice factoring to generate capital.
Factoring invoices vs Invoice financing
Pending invoices are potential income. We are also interested in buying these invoices in exchange for the chance to collect on your behalf. This is where factoring invoices and invoice financing are different. Accounts receivable factoring companies buy your invoices, and then handle the collection. Invoice financing companies advance you a certain amount of cash based on the value of the receivables. But we don’t take on the debt, or responsibility to collect the invoices.
Can business invoice factoring be right for your business?
If every customer pays their invoices on time, then cash flow shouldn’t be a problem
Working Capital Is Available
Business invoice factoring has its costs. Thus most will charge a premium for factoring your invoices. The business invoice factoring company charges a processing fee for the advance. And a second fee related to how long it takes for the invoice to be also contended.
These two fees can be hard to bear. Because you did the work and your client should pay you on time, and yet now you’re settling for less. Unfortunately, if you need a quick, and reliable, source of cash. Then invoice factoring might be your only solution. If you don’t have time to worry about collecting the invoice. Then it’s good to develop a relationship with a business invoice factoring company.
Example of business invoice factoring
Say you have $100,000 pending via invoice, with
To factor your invoices, the company will offer you $85000 immediately. And hold off on the remaining $15000. From there, the company will collect the $100,000 from your client. The invoice financing company will charge a 3% processing fee, along with a factoring fee. It’s common for invoice factoring companies to charge 1% each week the invoice is outstanding
Why should you use invoice factoring?
- Buying equipment
- Buying inventory
- Payroll
- Pay rent
- Meet unexpected expenses
Each company is different and why one company relies on invoice factoring might be different than another.
Advantages of Invoice Factoring
Fast access to Cash.
When compared to other options, like a small
Invoices are collateral.
Like many companies, you might be hesitant to consider invoice financing. Many businesses also think they have to put up collateral to get funding.
Someone else handles collections.
Collecting on invoice is also painful. Many companies hate it. Thus, With invoice factoring you can get someone else to collect on your invoice. As a small business, you may not have the manpower/time to handle collections.
Good credit isn’t mandatory.
When you apply for a business loan, your credit is a huge concern. If your business has good, or excellent credit, then you will get approved. With business invoice financing, this really isn’t important. While your credit might come into play, it’s not the end-all factor.
Disadvantages of Invoice Factoring
Giving up profits:
This is a principal issue many lenders have. The idea behind invoice factoring is simple – you get instant cash in exchange for some of your profits.
Higher fees:
With invoice factoring, you are able to get money fast. Sometimes in one day. While this is a huge benefit, you’re paying in return for this. Invoice factoring is more expensive than traditional financing, due to the fees.
Slow customers can harm you:
Some customers pay on time, some do not. The longer the invoice is outstanding, the higher your factoring fee.
Conclusion
Invoice factoring is fast, simple, and great. However, you have to make a business decision and think about everything – before going through with it.