A factoring loan is actually an accounts receivable sale instead of an advance. Businesses usually turn to factoring companies when banks deny their commercial loan applications. Factoring loans provide instant capital so the borrowing business can expand or pay bills. This type of a loan is much easier to acquire because the factoring companies care more about the customer's financial solvency than the borrowing business.
Instructions
1. Determine if you can afford losing the long-term income. Factoring works best as a short-term solution because you are selling future revenues at a discount. This solution makes sense when you have a looming tax payment. It also makes sense if you can get a deal on a large piece of equipment.
2. Get rate quotes from the International Factoring Association website (see Additional Resources). Enter all of the contact information about your business. A representative will call you with the best option. This website will provide rates from up to four different factoring services. Additionally, you can get quotes from GetFactored and the AllOptions website for comparison.
3. Apply with the factoring company that will pay the most for your invoices. The lending company will demand proof that you will have a solid influx of cash. Prepare a list of accounts receivable to submit with your application. You will also need your tax ID number and credit references.
4. Consider borrowing from a member of the International Factoring Association. Members of this group must follow a strict code of business ethics.
