Invoice Factoring FAQs

Factoring costs differ across all invoice factoring companies. Most companies charge 2 percent for the first 30 days and then charge 0.5% for every ten days until the invoice amount is paid off.

There are a few different types of invoice factoring. The major difference lies in the freedom in choosing which invoices to factor.
Selective factoring allows you to select the invoices you want to factor.

• Spot/Single factoring allows you to factor a single invoice. The option is suitable for instances you need to get funds for just one payment. 
• Whole turnover is invoice financing designed for long-term arrangements. It demands that you factor all invoices for the agreed amount of time.

Invoice factoring is suitable for businesses that have cash flow problems due to delayed invoice payments. Invoice factoring is suitable for all different businesses that make high ticket sales.
Overall, any type of business can take advantage of invoice factoring. The rule of thumb is that businesses that rely heavily on fast cash flow should consider invoice factoring.

Understand Invoice Factoring:

Take a business (Business A) that sells to several different customers on credit every month. The credit to these customers is typically 30 to 90 days to repay outstanding amounts. This refers to the accounts receivable of the business that is shown as an asset on the balance sheet but not liquid cash. 

On the other hand, Business A’s creditors require payments in cash at the end of each 30-day cycle. To simplify, let’s work with the assumption that debtors pay their dues every 60 days while creditors are required to pay up in 30-day intervals. The situation creates a funding gap since the business lacks adequate liquidity to fund upcoming debts due. In such cases, a viable solution lies in invoice factoring.