Debt Factoring, What is it and what are the benefits?

"Debt Factoring" is another term for the more commonly known "Invoice Factoring". Debt Factoring involves the sale of an invoice the sale of an invoice by a client to a 3rd party finance/factoring company in order to receive most of the invoice's value in advance of the payment from the end customer/payer.

The factoring company is basing their funding on their clients’ accounts receivable. The factoring company is relying on the ability for the end customer or “payer” to pay their accounts payable or debt. Hence the name debt factoring.

The end customer is informed that their “debt” now needs to be paid to the factoring company

The reason why so many companies utilize a finance facility like this is the following:

  • Debt factoring greatly improves cash flow which can fuel growth, in turn a companies’ bottom line;
  • It gives companies the ability for unlimited growth with really the only limits being the rate of their company sales and the ability of their end customers/payers to pay their bills.
  • Companies are not in a typical loan or line of credit situation where they only have a certain amount of dollars that when used up, does not allow them to obtain the needed cash flow or increased credit or working capital they need grow their business.
  • It gives the capacity for unlimited growth while paying a small fee to do so.

What are the fees or costs of debt factoring? The cost of factoring varies greatly depending on several different factors. The principle one is typically based on how long the customer takes to pay their invoices, followed by the volume of business a company is looking to receive funding on, what industry they are in, and how credit worthy a business’s clients/ customers/ payers really are.

Funding fees start at as low as under 1% of the total invoice value and the price will be tiered as the invoice remains unpaid. Every day or every 5, 10, 15 or 30 days, depending on how the factoring company has it set up with their client, the fee will incrementally increase. Sometimes a flat fee will be arranged so a business knows exactly how much will be coming off each invoice. To get an idea of Meritus Capital’s low fees check out our invoice factoring page at http://www.merituscapital.com/Invoice-Factoring

How long does it take to start debt factoring?

Each factoring company will take a different amount of time, but typically a to get set up, but a business should expect 7-14 days typically. Meritus Capital is proud to be able to offer funding quickly with their new online application and easy eSigning capabilities! With this process now easier with Meritus Capital you could receive debt factoring in as little as 3-7 days.

If you would like to get a quote or start the process to receive debt factoring - it is simple. Go here: https://www.merituscapital.com/Apply

You can quickly sign up, fill out some basic basic information, upload an AR aging and receive a quote within hours. We look forward to hearing from you.

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