Invoice Factoring FAQs

Answers to Questions About Invoice Factoring and Alternative Financing

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You Have Questions. 

We Have Answers.

When it comes to understanding the financing options available to choose from for your business, there’s a lot to consider. It’s likely that during your research, you’ve come across a question or two (or 20). We hope you did.

At ei Funding, we love showing businesses like yours the many benefits Invoice Factoring, Debt Consolidation and P.O. Financing can provide, and we’re always happy to answer any questions that come up about how it works. 

Browse our frequently asked questions to see if your inquiry is addressed, or contact us today so we can help answer your questions quickly and directly.

Frequently Asked Questions & Answers

Invoice factoring is one of the oldest types of business finance and is one of the best alternative financing options available to small business owners. Factoring involves the purchase of your accounts receivable for cash, at a slight discount to your invoices face value, in order to quickly provide working capital for your growing business.

By purchasing your accounts receivables, a Factor advances you typically 80% – 90% of your invoice value and then collects it from your customers for you. A reliable factoring firm will also provide you with guidance and financial advice throughout the process. By working with a trusted Factor, you’ll be able to focus more time on running and growing your business, not chasing down customers to pay their aging invoices.

There are five simple steps to invoice factoring: 1) You deliver your goods/services to your Customers. 2) You send invoices to your Customers. 3) You sell your invoices to a factoring company and get paid a cash advance of between 80% – 90% of the invoice face value, less a nominal fee. 4) Your factor collects payment directly from your Customers, typically 30-45 days later. 5) Once your factor has been paid in full, they’ll pay you the remaining invoice balance.

People often wonder: “Is factoring a loan?” The answer is no, and here’s the difference between the two:

With traditional bank financing, rates tend to be slightly lower, however, the approval criteria along with other restrictions, have grown recently, making it much more difficult to obtain, especially for small businesses and start-ups. When banks provide a line of credit, this is a debt, which will show up on your company balance sheet and be tied to some form of collateral of yours or the company’s, creating further restrictions.

Factoring, on the other hand, is not debt, but rather an advance against your invoice for products or services. Each advance is tied to a specific transaction, and as a result, is used only when you want to use it. It grows as your company grows, and is there for as long as you need it, since the money provided you are advances made against your own, earned invoices.

Learn more about how factoring compares to other financing online now.

Absolutely! At ei Funding, we love new companies. Every big company today was at one time a new company. Unlike banks, factors generally don’t call for very much history of a company since we rely heavily on the creditworthiness of your customers.

This allows you to get going almost immediately and focus on what you do best — grow your business. With years of factoring experience working with small companies, we at ei Funding are in a position to help you get the results you deserve.

Yes. If you, or your company, have a blemish on your credit record, we understand that. What makes invoice factoring special is that the focus of our credit analysis is not based entirely on you, but also on your company, and the quality of your clients, since ultimately it is they who will be paying your invoices. So although bad credit is not something we encourage, it is not a show stopper for obtaining factoring services for your growing business.

Contracts spell out the rules of the game for both sides, and at ei Funding, we do our best to make sure ours are clear so that everyone knows how things work. As far as contracts go, you can cancel your factoring agreement at any time, and the only thing we require is that it be done in writing 30 days before your intended stop date.

We are committed to a simple and transparent rate structure designed to help you keep more of your hard-earned money. And finally, if for whatever reason we don’t meet your service expectations, then we don’t want to stand in your way to find a service provider who does.

This is something we are asked all the time. There’s a misconception that factoring is a costly option compared to bank financing, when actually, a business ends up paying only a few pennies for each dollar factored.

As an example, a $1,000 invoice will typically cost anywhere between $25 – 40 in factoring fees, so when we say it only costs cents on the dollar, we really mean it. 

No. Invoice factoring is not considered debt. It involves the purchase by the Factor and the sale by the Client, of invoices for goods and services.

Because of this fact, small businesses may use invoice factoring even if they already have a line of credit with a commercial bank. 

There are many advantages of choosing factoring as an alternative for financing your business. Here are some of the best reasons to use invoice factoring for your business:

  • Immediate cash advances, typically same-day, for your Invoices
  • It’s not debt, so no monthly term payments 
  • It’s flexible — you use it only on the Customers you choose  
  • It inexpensive, costing your business only pennies on the dollar 
  • You receive 80 – 90% of your invoice amount up front, in cash
  • It grows with your business
  • It provides necessary cash flow to manage through potential slowdowns or Seasonality which are a normal part of your business

Any business that invoices their company clients can use factoring to get the funds they need. Businesses in industries from manufacturing to professional services can use invoice factoring to their advantage. So long as you produce an invoice for goods you deliver or services you render, you can use invoice factoring.

While any company can use invoice factoring, there are a few types of businesses that can benefit the most from using it. These include: cable construction services (for telecommunications), staffing services (for hotels, restaurants and rental car agencies), retail distribution companies, manufacturing, marketing and PR agencies, and craft distilleries and breweries, just to name a few.

First, we recommend you familiarize yourself with what invoice factoring at ei Funding entails, if you haven’t done so already. If factoring seems like something you’re interested in pursuing for your business, submit an online application to begin the process. If you have any questions about the application process, please contact us at 407-734-4155.

When applying online, we recommend you have all of your most important documents on hand. This includes your driver’s license, Social Security number, articles of incorporation of your business (LLC, Corporation, or other), and your business tax I.D.

You’ll also need financial documents that account for at least two years:

  • Balance sheets
  • Profit and loss (P&L) statements
  • Corporate tax returns
  • Three months of bank statements

We like to do things right, so we typically take a week to 10 days to get you set up, once we’ve received all the necessary information from you, although if needed, we take as little as 24 – 48 hours.

From our experience, we’ve learned that what’s most important to you in the long run, is not the fast setup, but the fast funding — of the correct amounts, when and how you need it. We do our best to get you set up quickly, but since we also depend on you providing us the requested information, we’ll work to get it done in as little time as possible.

You can easily apply online any time. And once you’re approved and set up, in cases where you already have invoices to approved customers, it’s likely we can get you funded on those right away.

Factoring is widespread in many industries including Staffing, Construction, and Transportation, and many Customers including Shippers and Brokers actually prefer dealing with Factors for accounts receivables management.

To these Customers, it shows you take your invoicing seriously and see the value of putting accounts receivables management with us, and therefore allowing you to focus on what you do best — running and growing your business.

As you know, running a small business takes a lot of work. Although our focus is Factoring, we also offer Purchase Order Financing and Debt Consolidation as part of a factoring facility set-up. We are focused on finding the best solution that works for your growing small business, because at ei Funding, your success is our success.

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