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Invoice Factoring

Seamlessly turn outstanding invoices into cash flow.

Invoice Factoring at a Glance

What to Expect

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Factoring Lines
$200,000 - $7,000,000
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Payment Period
30 days - 120 days
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Funding Turnaround
As little as 4 days
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Available Through
PalmTree Financing
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Invoice Factoring 101

What are Invoice Factoring?

nvoice factoring, also called factoring receivables, is a financial transaction where a business sells its invoices to a third party (a factoring company). In return, the business receives an advance based on a percentage of the total value of the invoices. The factoring company then assumes responsibility for collecting payments from the customers who owe the outstanding balances.

Understanding Factoring Receivables

Whether you know this financing strategy as “factoring receivables” or “invoice factoring,” many businesses choose to factor invoices to enhance their cash flow and business growth.

By selling invoices to a factoring company, a business gets an immediate payment instead of waiting on outstanding balances to be paid, helping improve cash flow and facilitate continued growth and operations.

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Benefits of Getting an SBA Loan Through PalmTree Advance

Minimum Requirements for Invoice Factoring

Before you can secure funds through invoice factoring, you and your customers must meet certain requirements. Here are the minimum requirements that must be met.

  • Outstanding Invoices Between 30-90 days
  • Creditworthy Customers
  • Invoice Aging Report
  • Your Business’s Articles of Incorporation
  • Business Bank Account
  • Your Company Must be Categorized as B2B (business-to- business) or B2G (business-to-government).
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Understanding Invoice Factoring Requirements

Invoice Factoring for small businesses comes with a set of minimum requirements to serve as a safeguard for all parties involved. Here are some of the factors that are considered:

Of course, these are not the only criteria needed for invoice factoring. Additional qualifications may be required based on the health of your clients’ credit worthiness, the outstanding amounts and ages of your invoices, and the financial health of your own business.

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Have Question About Invoice Factoring?

Speak with a PalmTree Advance Financing Specialist to learn more.

Invoice Factoring FAQs

What is the difference between invoice factoring and invoice financing?

While these are both financial solutions that involve using unpaid invoices to access working capital, they differ in structure and how they operate. Here is a breakdown:

Invoice Factoring — With invoice factoring, the factoring company purchases your unpaid invoices outright, meaning that they assume ownership of your invoices and are now responsible for collecting payments from your customers. Once an invoice is submitted to the factoring company, you receive an immediate advance on those invoices with the remaining percentage, minus fees, provided once the customer pays the invoice.

Invoice Financing — With invoice factoring, you retain ownership of your invoices. Instead of selling them, you use them as collateral to secure a loan from a bank or other financial institution. The loan you receive will be a percentage of the invoice value, which you will repay (plus interest and fees) once your customers pay their outstanding balance. During the process, you will continue to manage your collection process and if your customer fails to pay, your business absorbs the loss.

What is the difference between invoice factoring and small business term loans?

Invoice factoring for small businesses involves selling unpaid invoices to a third-party factoring company to receive immediate cash.

Small business term loans involve a business borrowing a lump sum of money with a fixed repayment term and interest rates, offering quick access to working capital with a set repayment schedule and pre-agreed terms.

In short, while both options provide a business with cash, a small business term loan is a loan that must be repaid, and invoice factoring is a transaction.

hat is the difference between invoice factoring and invoice discounting?

While these two terms are very similar, they differ in key aspects, which we’ll explore now.

Invoice Factoring — Invoice factoring involves a business selling its unpaid invoices to a factoring company. The factoring company then assumes ownership of your invoices and is now responsible for directly contacting your customers to collect payment.

Invoice Financing — Invoice discounting is a type of invoice financing. With invoice discounting, you retain ownership of your invoices. The financing company you work with will provide you a loan based on the value of those invoices, meaning that you maintain control over contacting your customers and collecting payment.

Are UCC filing required with invoice factoring?

Yes. All invoice factors require some type of UCC (Uniform Commercial Code) filing.

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