While most people would have no idea what accounts receivable financing is, we are pretty sure that if you replace the word “factoring” with “financing”, you will know exactly what accounts receivable factoring is. But just to make one thing clear, You do not get into debt when you get accounts receivable financing. Rather, what happens is that you’re financing company takes over your invoices.
There are many accounts receivable factoring companies out there that offer this type of service and while they may differ in the details, their basic process is the same. First, you send them your invoices. They will then send you the money that you would have received from your customers (had you not partnered with an invoice financing company) so you can use it for your business. Next, they will collect the money from your customers.
This type of service is for very useful for businesses that have 90-day, 60-day or even 30-day invoices. As a business, liquidity and cash flow are critical, and you cannot afford to wait until your customer pays before you can go on operating business as usual.
Obviously, with invoice financing, you do not receive 100% of the amount in your invoices. Depending on your financing company, you will only be getting 80 to 90% of the total invoice amount. The difference in the amount of the invoices and the money that you receive is the income of the financing company. While it may seem like you are giving up part of your income, the truth is that you are actually giving up the hassle of waiting for your clients to pay.
But if you are worried about your bottom line, you do not need to have all of your invoices financed. You can opt to only have a certain portion of your total invoices shaved for financing.
There are many financing companies out there. However, not all of them are created alike.
If you want us to recommend a company for you, we would recommend IPS. What is IPS? It stands for Invoice Payment System. While it is not the only accounts receivable financing company there is, we are recommending this because it only takes about 8 hours after you send them your invoices before you can get the money. Across the industry, this is the fastest that you can get cash for your invoices.
Just how the system works: You enter your invoices into the IPS system. The company will then verify information on the invoices and check your creditworthiness of your clients. The money is sent to you within eight hours. Your customers are informed and they pay their outstanding invoice at the IPS website on http://invoicepayment.ca/en/index.php”
If you need cash right away, you can apply for financing right on the company’s website. The process is really easy and convenient as there is no face-to-face application. You just need to click on the Getting Started button, fill out your information and you can get started right away.