The word Factoring simply stands for the purchase of a company’s pending accounts receivables at a discount. Any business that generates invoices can sell all or some of their receivables and receive an immediate advance of cash. Several funding sources are realizing the need of businesses to increase their cash flow and are providing factoring as a funding solution.

Converting invoices into cash is an emerging trend as more and more businesses are discovering factoring as a tool for capitalizing their growth. 80% of small businesses never make it to their 2nd year because of cash flow problems. Factoring is not a loan, but a discounted purchase. If the factoring discount is 3%, for example, the invoice is being purchased for $.97 on the dollar. The advantage for the small business is that they are receiving their money within days from a funding source instead of within weeks or months from their customer.

Waiting 30, 45, or 60 days for customers to pay their invoices is in essence extending them a free line of credit and for many businesses this creates a serious “money gap” between the time a sale is made and the time a customer pays. Factoring allows a company to convert these dormant assets into working capital that can give them the funds they need to meet payroll, pay vendors, take on new clients, fill incoming orders, and pay other bills.

Unlike a bank loan, factoring relies on the strength of a business’s customers more than the strength of the business itself. Therefore, factoring can be a tremendous funding opportunity for smaller company’s that although have a profitable business, may lack the assets and credit history to secure traditional bank financing. Factoring relies solely on the accounts receivable so, the more sales a business makes, the more receivables they can factor on an ongoing basis. “When used strategically, factoring can be a very effective strategy for the small to mid-size business”, says Karen Akins, Funding Programs Manager for Streamline Funding. “…and in many cases, the discount is easily offset by the benefits that having working capital provides”.

Funding sources for factoring are typically investment companies or private investors that specialize in factoring receivables and are willing to take on the risk of collecting the receivables in exchange for the discount they apply to the purchase. In assessing the amount of the discount, the investor primarily considers the amount of invoice(s) being purchased, and the payment history of the company’s customers. Factoring can offer businesses a dependable, continuing source of cash without the necessity of making separate loan applications or selling an interest in their business to a venture capitalist.

About Streamline Funding
Streamline Funding is an organization representing hundreds of investors that offer a variety of funding resources and cash flow solutions to individuals and small businesses. For more information, please visit www.streamline-funding.com.

Contact Information:
Karen Akins, CCFC
Funding Programs Manager
Streamline Funding
703-385-4164 phone
703-713-0869 fax

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