Factoring is a transaction where a business is selling its invoices to an invoice factoring company to gain access to the cash tied up in outstanding accounts receivables. The receivables are removed from your books and are added to the factoring company’s balance sheet at their fair value.
The factoring company would be purchasing these accounts receivables at a discount rate. We then wait on your customers to pay the invoices, whether that is 30, 60 or 90 days later.
Meritus is always willing to work with our customers to have a fee structure that works great for all parties. The cost of invoice factoring depends on your unique situation, typically based on credit quality of the customers and the amount of invoices a business is looking to factor. Typically, the cost will be in the range of 0.3-0.63% of the invoice total each 10 days the invoice remains outstanding. As was mentioned initially, pricing is very much situation- dependent and we work out what is best for you.
An advance rate is how much of the invoice value you would be receiving up front from the factoring company. Typically this would be between 80-95%.>
Payroll funding is a term used by working capital finance or accounts receivable factoring companies. The term specifically refers to providing the capital it takes to pay the employees of temporary staffing companies.
The key benefit of using a payroll funding company to finance your temporary staffing company is making sure you can always fill the job orders from your clients. Your employees are always paid on time each payroll period even if your clients take 10 to 90 days to pay your invoices.
Factoring companies do need a 1st position UCC filing on the accounts receivable of the business they are providing factoring for. That being said, there are many cases where agreements can be made between lenders to facilitate factoring even if you have some other type of financing. Speak with someone at Meritus Capital to discuss your situation and how we may work together.
A large portion of how long it takes to get set up depends on you and how quickly you can get us the documentation we need. Businesses typically should expect 7-14 days. 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 funding in as little as 3-7 days.
There are many reasons why a business would want to utilize invoice factoring such as
- rapid growth,
- long drawn out payment terms from their customers,
- or a demanding payroll
Go here to check out the top 10 reasons why businesses use invoice factoring!
Yes, we have provided factoring for many businesses right from their first invoice!
To learn more about why factoring works great for startups. Check out our article at: https://merituscapital.com/why-factoring-works-for-startups
The two main pieces of criteria you should think about before applying for invoice factoring are:
- Is the work you are invoicing for complete?
- Are my clients credit-worthy (if you're not sure, we can check for you!)
Beyond that, there is a short application process so we can understand your business.