So, contra accounts like these might be ineligible for factoring. In that case, there is the possibility that you might offset that company’s receivables and payables account at some point. For example, suppose you buy and sell from an organization.

So, some factoring providers may not provide financing against certain types of invoices. And, naturally, a factoring company will be looking to minimize the risk of non-payment. Eligible Sales InvoicesĪ factoring company buys your sales invoices from you because the customer will later pay those invoices. However, if your business is export-orientated, some providers do offer international factoring solutions. US factoring companies generally only provide sales invoice financing to companies registered in the US trading with US customers. Related: 10 Tips for Determining B2B Credit Terms Domestic Trading And you would be unlikely to be eligible if you are in the process of filing for bankruptcy. You might not qualify for factoring if your business has any significant unresolved debts, for example. However, most factoring companies will consider the solvency of the business. The financial status of your business is not as critical for applying for factoring as it would be when applying for a business loan. On the other hand, if a significant proportion of your accounts receivables are companies with bad credit, this will probably be an issue for some factoring companies. So, if you have a reasonable number of customers with good credit, you will likely be accepted for factoring. Customer CreditworthinessĪ factoring company will be more interested in the credit rating of your customers than that of your company. However, if your business collects sales invoices in only 7-15 days, the benefit of factoring invoices will be limited. And, if you grant 30 or more days credit, factoring will be an ideal way to turn accounts receivable into cash faster. And those terms must be stated on all your sales invoices. You must have clearly defined credit terms for your customers. So, if most of your customers are consumers, factoring may not be available for your business. However, most companies will only factor business-to-business (B2B) invoices. Some factoring companies provide consumer credit factoring services. Related: Ten Tips to Get Your Invoices Paid Faster Business to Business Sales So, it is worth shopping around when you are looking for a suitable factoring provider for your business. However, most of the qualifying criteria mentioned here vary. Some companies will also expect to see a business invoicing multiple customers rather than only one. The minimum is generally ranges from $25,000 – $50,000. Most factoring companies have a minimum monthly sales requirement. Factoring only provides finance against credit invoices issued to creditworthy customers. So, factoring will not be a suitable financing option for cash-only businesses. Of course, your business must raise sales invoices to apply for invoice factoring.

You will also usually be expected to have a business bank account and a business tax ID. Typically, a factoring company will ask to see the articles of incorporation, articles of organization, or a DBA (doing business as) filing. So, you can expect to be asked for proof of business structure when applying for factoring services. Sales invoice factoring is only available for businesses. This article offers a guide to the qualifying criteria your business will need to meet to be accepted by most invoice factoring companies. So, if you have been wondering if your business would qualify for invoice factoring, read on. However, not all businesses can take advantage of the factoring opportunity. And gaining approval from a factoring company is generally much less of a challenge than getting bank business loan approval. Many businesses in many sectors benefit from factoring. The immediate receipt of most of the money due from an invoice simplifies cash flow management and releases funds that can be used for business expansion. Sales invoice factoring allows businesses to collect cash from their invoices as soon as an invoice is issued. Most B2B Businesses Can Take Advantage of Factoring

Factoring invoices for headhunters