What is Invoice Factoring
While Invoice Financing is a form of Invoice Discount, Invoice Factoring is a form of Invoice Financing. Confusing? Invoice Factoring helps take over the collection from your clients by purchasing your accounts receivable. The lender will pay you a percentage ranging from 85% to 90% of the total quoted amount on the invoice. Then, take over you in collection of the full amount. Upon the full collection, they will reimburse the difference with an agreement of a small fee for the service. Your clients will then make the necessary payment during the collection . Invoice Factoring is suitable for business with outstanding accounts receivable of 2 to 3 months and for those who prefer an external financial service provider to do it for them.
Example of Invoice Factoring
Your’e a wholesaler of a restaurant. You issue a $10,000 invoice worth of ingredients and equipment to your client (Restaurant) . The terms of the invoice clearly states that it is to be paid within 2-3 months. However, during these 2-3 months of collection your company experiences a faulty machinery and you require immediate financial support to pay up for the unexpected emergency.
A financial institute company(Multiply) will purchase your invoice for $8,500 up-front. We will then follow up with you on collection of the payment. The factor will then charge a fee of 2% receiving $200 and the remaining 13% will be refund to you.
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Let Multiply be your option for Invoice Factoring Today!