Factoring basicsPosted by Chavez Covington on February 5th, 2021 Invoice factoring involves a factoring agreement between a product and services provider and a factoring company. The provider then receives a percentage of the outstanding invoices with the factoring company taking over the collection of the outstanding invoices when they are due. There are a myriad of terms that are used to describe the factoring process such as invoice discounting, invoice financing, or receivable factoring however the term financing implies borrowing money from a financial institution using your invoices as collateral. This is decidedly different from the premise of invoice factoring which involves the receipt of funds without acquiring a loan. factoring financing Learning what constitutes factoring basics is what differentiates invoice factoring from a traditional loan. Invoice factoring is: Not a loan You can get access to immediate funds often within the same day You have flexibility in terms of how much you want to factor Suitable for small business and startups There are a few different types of invoice factoring: Recourse and non-recourse factoring: with recourse factoring the onus of the reliability of the customer paying their invoices rests on you. With non-recourse factoring, there is no such risk involved. Spot factoring: factoring provides flexibility as to how often and how much you choose to factor. Spot factoring commonly refers to a once-off transaction for a business that has a large amount of capital tied up in a single invoice that needs the value of this invoice to cover a large expense. Reverse factoring: involves the supply chain process where the seller of service gets approval for supply chain factoring and the buyer is required to pay the factoring company. To find out more about the different factoring services we provide contact Viva Capital Funding, LLC today.Like it? Share it! |