Invoice factoring can be an excellent avenue for business capital, based on the invoices owed to you by your customers. However, if you are a newbie, this process can seem overwhelming. Kore Capital explains the factoring process in 5 easy steps!
Initial Contact
This is an initial meeting where the feasibility and suitability of accounts receivables funding for your business will be discussed thoroughly. The process can only go forward if your business is eligible for this type of funding.
Application
The application is the next step in the process of factoring your invoices. Make sure to fill out the prescribed application form and provide the required documentation. Apart from the standard documents, the most important information that the factoring company will require is a detailed breakdown of your accounts receivables. Once they analyze these details, they will check how creditworthy your clients are. And, most importantly, if they can make payment when it is due.
As is the case with any loans, creditworthiness and how promptly payments are made matters. However, with accounts receivables funding, it is your clients’ credit ratings and payment history that are under the radar.
Legitimacy
Before providing the funding, the factoring company will also verify all your documents to ensure you are legally registered with the right government agencies. This is to avoid any fraudulent or illegal transactions that can land both parties in trouble.
The Offer
Once all the documentation is in place, an underwriter from the factor agency will get in touch with you. They will provide you with an offer, which is usually between 70% to 90% of the invoice amount. This amount as well as the rate at which you receive the funding depends on the level of risk the factoring agency is undertaking in this relationship.
Commitment
Finally, the factoring agency will deposit the funds to you with the commitment that the remainder of it will be paid to you once your clients’ have paid them in full.
If you need more information on how you can contact factoring agencies and kickstart the account receivables funding process with them, give Kore Capital a call today!