We receive a number of questions from Orlando business owners who want to get a better understanding of invoice factoring. We have also seen a lot of misinformation floating around which either misrepresents the process or is paid for by traditional lenders to discourage Orlando business owners from taking advantage of the benefits of factoring. In order to make things easier, Durham Commercial Capital has put together a list of the most frequently asked questions about factoring for Orlando-based businesses.
I thought factoring is only used by failing businesses?
That’s the reason traditional lenders like to give for why they don’t offer factoring. The truth is that businesses of all kinds throughout Orlando use invoice factoring to improve cash flow. This could be done to correct revenue issues, reduce the burden on internal accounting resources, eliminate the need for collections, or to accumulate capital for growth projects. Very successful businesses across all industries use factoring to prevent lag caused by staggered payment schedules.
Does factoring add more debt to my business?
The short answer is “no.” The more in-depth answer is that receivables are considered assets owned by your business. Invoice factoring is a sale of those receivables for immediate access to revenue. Orlando business owners do not take on any debt by using factoring. If you ever wondered why most other lenders do not offer invoice factoring to Orlando business owners, it’s because factoring doesn’t place debt on the books which must be repaid over long periods with interest.
How does factoring eliminate collections?
Orlando businesses that issue invoices with payment schedules of 30 days or longer typically experience lag in revenue from staggered customer payments. Occasionally, certain customer accounts will go unsettled beyond the schedule and businesses will have to perform collections. Collections take time, and some businesses have to wait an additional 45 days before seeing the revenue they are owed. Invoice factoring eliminated the need for collections by converting receivable to cash within 24 hours. As an invoice is generated, it is submitted for factoring, and the business receives revenue. The need to wait and perform collections is moved out of the picture entirely.
I’m an Orlando business owner. Can I use factoring services?
The general rule is any business that issues invoices with payment schedules of 30 days or more can use factoring services. Orlando businesses such as manufacturers, attorneys, medical practices, freight companies, staffing agencies, construction companies and more use factoring to maintain a healthy cash flow, reduce the need for loans, and rack up capital for growth.
Durham Commercial Capital specializes in factoring for Orlando business owners. To learn more about factoring or to set started, contact our offices.