Today we answer one of the most commonly Googled questions about Factoring: Is Receivables Factoring debt? Read on to find out.
Is Receivables Factoring Debt?
Although there may be confusion because Receivables Factoring is also known as “debt factoring,” the short answer is no: Receivables Factoring is not debt. And this is great news, as we’ll see below.
When you have a business, some of the two most common options to finance it are debt financing and equity financing.
Debt financing means taking out a loan, which may slow down your business. Equity financing, on the other hand, means giving up ownership of your company, which no one really likes.
Luckily, business owners have a third option: Receivables Factoring. Factoring means selling your unpaid invoices to a company that pays you upfront and collects them from your customers in exchange for a small fee. This way, you get cash immediately instead of having to wait 30 to 90 days for your customers to pay you.
So as you can see, Receivables Factoring is not debt because you are not taking out a loan, but selling something that already belongs to you: your unpaid receivables.
Factoring Actually Protects You From Bad Debt
Not only is Factoring not debt, but it can protect you from bad debt.
Simply put, bad debt is debt that can’t be collected for whatever reason. Needless to say, businesses do all they can to avoid bad debt, and you should too.
There is a type of Factoring called non-recourse Factoring that provides all the advantages of Factoring, plus protection from bad debt.
With Non-Recourse Factoring, the Factoring company takes on the risk of any non-payment. This means that if you factor an invoice and your customer is unable to pay it, the Factor absorbs the loss.
To learn more about how Factoring protects you from bad debt, check out this previous post. And if what you need is a dependable Non-Recourse Factoring company, look no further than ACS Factors.
ACS Factors: We Turn Your Invoices Into Immediate Cash
At ACS Factors, our mission is to help you get the capital you need to move your business forward regardless of your industry or the size of your organization.
We are located in Upland, California, and have many clients in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.
Reach out today by email (firstname.lastname@example.org) telephone (909-946-5599), or through our social media accounts on Facebook, Twitter, and YouTube, and start converting your accounts receivable into cash today!