As everyone knows, one of the benefits of receivables factoring is that you don’t have to meet the strict requirements of bank loans. But how do you qualify for receivables factoring, exactly? Follow along to discover the answer.
How Do You Qualify for Receivables Factoring?
In order to qualify for receivables factoring, you just have to meet four basic conditions: being a B2B business (that is, a business that deals with other businesses), having creditworthy customers, experiencing difficulties qualifying for conventional financing, and having established invoicing practices.
1. You Are a B2B Business
The term “B2B” refers to businesses whose clients are other businesses. Trucking, manufacturing, and wholesale companies are some common examples of B2B businesses.
Now, factoring your receivables means selling them to a factoring company, which pays you upfront and then collects the invoices from your clients in exchange for a small fee. That’s why being a B2B business is a basic condition for taking advantage of factoring
2. You Have Creditworthy Customers
Factoring saves you the trouble of waiting 30 to 90 days to get the cash your business needs. However, the system only works if your clients pay their invoices, even if sometimes they take their time to do so.
As part of the approval process, a factoring company will determine the creditworthiness of your clients.
The great news is that at ACS factors, approval takes just a few hours. Plus, we offer non-recourse factoring: this means that if your customer fails to pay their invoices, you’re not responsible for the payment. Our loss, not yours!
3. You Have Established Invoicing Practices
Another basic requirement for receivables factoring is having established invoicing practices.
A standardized system that clearly outlines amounts owed, client details, and payment timelines not only increases the efficiency of your business but also makes it easier to get cash by factoring your receivables.
Some steps you can take to improve your invoicing practices include:
- Review your receivables regularly
- Automate as many processes as possible
- Be diligent in following up on past due invoices
- Offer multiple payment methods
- Ensure that your invoices are easy to read and include all relevant information
To learn more about this topic, check out our previous blog, “How to Handle Past Due Invoices.”
4. You Have Difficulties Qualifying for Conventional Financing
If for whatever reason you can’t access conventional financing, then factoring is the option for you.
With factoring, having a short or checkered credit history isn’t as relevant as having creditworthy customers, as we saw in point number two.
So now you know it: if you meet all the requirements described here, say goodbye to the stringent requirements of traditional financing and welcome the flexibility, efficiency, and ease of receivables factoring
ACS Factors: We Turn Your Invoices Into Cash
We are a Factoring company located in Upland, California, with many clients nationwide in the distribution and logistics corridor which includes Ontario, Riverside, Fontana, Jurupa Valley, and Moreno Valley.
Contact us today by email (email@example.com) telephone (909-946-5599), or through our social media accounts on Facebook, Twitter, and YouTube, and start enjoying the convenience of converting your accounts receivable into cash today!