The ?Must-know? FAQs of advance business capital answered for you

Posted by FactoringCompanyGuide on June 9th, 2017

Maintaining a commercial availability to ensure a smooth working is a paramount factor in every business. But, there can be a financial crunch which can cause some hurdle. To avoid such scenario, some companies can arrange and provide advance business capital.

In simpler and financial terms this is process is known as factoring. This business plan came to trend in the 1990s, and now it is taking the entire financial transaction of freight and trucking business to a new level.  

How does it work?

It is important to understand how and when a company gets advance business capital. This is selling of ‘invoices’ by debtors to the third party of a factoring company. This happens at a discounted rate. Once the borrower receives money from customers/ clients, they are to pay back advance capital to the factoring company. In short –

(I) Deliver services – (II) Submit/ provide Invoice – (III) Receive advance capital payment – (IV) Get the payment from customer – (V) pay back the money

When it comes to a financial transaction, it is important to know about intricacies of this subject and get some real details about it. Here, you will have an idea about all the important that you must know!

What is the discounting in Invoice?

There is a certain percentage of discount application in the process. The amount that the factoring company will sanction against invoice will not be 100%. Rather it varies from 70% to 90%; depending on different companies.

As soon as the debtor pays back money, factoring companies rebate the complete invoice amount.

Note: As per principle, the invoice should be less than 90 days old.

How much the rebate cost?

Rebate is more like the second installment of the entire transaction. Depending on initial or capital payment, this varies from 5% to 30% on an average.

Some facts regarding advance business capital

Here are some figures to know and understand how factoring is taking a stable hike.

-Globally in the last financial year counting, factoring sector had an overall hike of 32%

-America itself accounts to around 8%- 10% in the entire factoring sector.

-More than 60% of the small scale trucking, freight, and carrier business avails factoring service.

What is the limit of capital?

There is no such limit on advance business capital. It entirely depends on invoice sum.  

What is the payment mode?

This depends on how you are willing to take the credit. It can be as cash or companies also provide fuel cards in which they transfer the payment amount.

How does factoring help to improve the business growth?

The reason why people face hurdles in business is due to lack of capital. But with factoring companies in the scenario, you can get the money against invoice within 24 hours (It may vary in some particular condition).

Having all these information regarding factoring; you can avail advance business capital and use it properly. Look for the best factor company and avail this service and never let down your business again.

“Let your business reach the highest heights!”