Invoice factoring is a unique way to obtain almost instant working capital. It works for businesses that issue invoices and involves the selling of unpaid invoices to a third party in return for an upfront cash payment. The third party then takes on the risk of collecting these invoices. Consultants, attorneys, staffing companies, and logistics companies are typical businesses that may benefit from this type of alternative financing

Pros and Cons of Invoice Factoring

As in most business decisions, there are advantages and drawbacks to the choice to use invoice factoring. The benefits include:

Simplicity of application
Quick arrival of funds
Can be utilized multiple times.
Shifting the collection risk to a third-party, and 
Can be utilized even if you’ve been turned done for funding elsewhere

Some of the Drawbacks to Think About Are:

Not every business sends out invoices, therefore not every company can use this form of financing
Your clients (those to whom your send invoices) need to be reasonable creditworthy
You will not receive the full value of your invoices
Instead, you will receive a discounted amount, generally 80% to 95% of the value, based on the discount factor used by the funding agent
You may have to pay interest on the funding until the agent collects from the client.

Finding the Best Factoring Agent

When looking for a third party from which to obtain invoice factoring, you want to keep the following questions in mind:

Does the agent specialize in your particular industry?
What is their discount factor?
What interest rates, if any, will be charged?
How easy is the application process?
When can you expect to receive your funds?

Gipson Commercial Solutions is a leader in invoice factoring. If you are interested in using invoice factoring for your business, please contact the professionals at Gipson Commercial Solutions. They will answer any additional questions that you may have.