Invoice Factoring
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 in other 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 a 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 factoring.
Benefits of Factoring
1. Provides you with immediate cash.
2. It is also based on your customer’s 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
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 in 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?
There are so many ways to increase cash flow and grow a business. It’s hard for small business owners to wrap their heads around the concept of invoice factoring. Before you make your next move. Understand the pros and cons of invoice factoring against other methods like lines of credits and business credit cards.
- 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.
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.
