It can be frustrating for growing companies to wait for over a month for their invoices to get paid. Waiting for such long times stalls progress in businesses since there will be limited capital to pay workers and suppliers as well as sourcing raw material. This can create substantial cash problems in the financial structure of a business. Invoice factoring has come in handy to solve this problem, especially for residents of British Columbia, Canada. Factoring in British Columbia is an essential tactic that has financed numerous slow-paying invoices, giving companies an opportunity to fund their businesses. Factoring companies offer different rates depending on various factors in play.
How Factoring Works
Invoice factoring is a simple process that any company can readily adapt when they need to sell their invoices for immediate funds. A company that needs to factor in their invoices approaches a reputable factoring company to agree on service terms. Once approved, the factoring company will request the business’ invoices that they need to finance. The factoring firm then deposits the advance funds in the company’s account, which usually is about 80% to 90% of the invoice. The client will then pay the invoice after the agreed time, and the factoring company takes up its share, and the business firm helps take the remaining amount.
Qualifications for Factoring Invoices
Not every company qualifies for invoice factoring in British Columbia, although a lot of companies are eligible. Factoring of invoices is a service that is available for businesses of all sizes and needs as long as they meet critical criteria. First, the companies should have clients that can pay the invoices in up to ninety days or less. Beyond ninety days, the factoring rates soar high and become infeasible to a company. The company should also possess excellent invoicing practices such as clear invoices and accurate recording of the invoices to eliminate any doubt or errors. Errors can result in factoring companies suing for attempted fraud or canceling a company’s application for invoice factoring. The company should also not have liens encumbering in their invoices and must be free of serious tax and legal issues. These are some of the elements needing to be set straight by any company before they qualify for invoice factoring.
Often, the invoice factoring rates range between 1.5% and 5% per month, and this depends on the amount of funding a company needs to be financed as well as the company client’s creditworthiness. It is essential to settle for a factoring firm that offers the best rates, which will not result in significantly reduced profits.
Therefore, factoring in British Columbia is a well thought out idea that is easily adaptable by many companies that require urgent funding. Since many companies, both start-up and growing, qualify for invoice factoring means that these businesses are at an advantage since they can receive funding at any point and time. Factoring is a new approach to sustaining business’ growth and operation in British Columbia.