Understanding A Small Business Factoring Quote

Any small business owner needs to understand his or her options when it comes to maintaining a steady cash flow for the business. Unfortunately, many small businesses have cash flow problems because of the weeks or months between invoicing and customer payments.

If this sounds like your business concerns, getting a small business factoring quote can help you to more effectively manage your cash flow without the need for a traditional personal or business loan or a line of credit.

How it Works

All factoring works by a business selling outstanding invoices to the factor for a percentage of the face value of the invoices. This is typically 80% with the small business factoring quote providing the specific initial payment amount, discount rate, and fees to the business prior to the sale of the accounts receivables.

The factor will then assume collecting on the outstanding invoices. When the invoices are paid in full by your customer, the factor will deduct the agreed upon fees from the held 20% and transfer the residual to your account.
The process to get a small business factoring quote is very simple when you are working with a reputable, experienced factor. It will include:

  • Choosing the factoring company
  • Setting up an account online with the factoring company
  • Submitting the accounts receivables you wish to factor
  • Providing account information to the factor for the ACH (direct deposit)

Additionally, the factor will typically provide a portal or customer login where you can review the status of the account and know when any residual payments will be available.

This residual amount, sometimes known as the rebate, may be provided for each customer repayment or it may be batched and sent once all invoices in the order are paid in full. Either option will be effective for most small businesses.

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