Invoice Factoring Blog Posts

invoice factoring

New to Invoice Factoring? Avoid These Common Mistakes

It’s been estimated that if all invoices were paid on time, U.S. small businesses could collectively hire 2.1 million more employees, which would reduce unemployment by 27 percent. That’s just one reason why more and more businesses are working with invoice and freight bill factoring services. But before you decide whether this service is right for your financial needs, it’s important to understand the process to avoid making some common mistakes.

Not reading over your invoice factoring services contract thoroughly. 

This is a mistake that can lead to discrepancies and overall dissatisfaction. But as is the case with any number of financial services, everything you need to know is clearly laid out in the contract — you just need to take the time to read every word. Otherwise, don’t be surprised if you incur additional fees or other consequences you weren’t aware of. Read every word and have a clear understanding of your contract before making it official with your signature.

Not being upfront with your clients about working with a factoring company

Most clients will have no problem working with a business that uses invoice and freight bill factoring services. After all, it shouldn’t affect any part of the quality of service they receive. You don’t want to keep them in the dark, especially because a factoring company representative will be contacting them about invoices and collections. Simply let them know that a third party will be handling your invoices and collections processes moving forward. You may even be able to provide better and faster service to your clients because you’ve outsourced these time-consuming tasks to another company.

Not considering invoice factoring as a solution to your cash flow problems

Small businesses (defined as businesses with fewer than 500 employees) account for 99.7% of all business in the United States. If your business is one of them, and you frequently have trouble getting your clients to pay their invoices on time, invoice factoring should be among the services you consider.

According to a U.S. Bank study, 82% of businesses that fail do so because of cash flow problems, and invoice factoring is one of the most efficient ways to get immediate and ongoing cash flow for your business without incurring debt.

Ultimately, avoiding these mistakes is the best way to optimize your business’s finances and cash flow. For more information about business invoice factoring, contact Triumph Business Capital.

invoice factoring myths

Don’t Fall for These Myths About Business Invoice Factoring

There are nearly 28 million small businesses in the U.S., and in today’s uncertain economic climate, many small businesses struggle to stay afloat as a result of insufficient funds. In fact, according to a U.S. Bank study, 82 percent of businesses that fail do so because of cash flow problems.

For many small businesses, however, invoice factoring can be a viable solution to their cash flow issues. Invoice factoring is a type of accounts receivable financing that converts outstanding invoices into immediate cash for your small business. Before choosing the right invoice factoring service for your business, it’s important to understand the facts. It’s also important to clear up the potential misconceptions about invoice factoring. Here are just a few invoice factoring myths you shouldn’t believe.

Myth 1: Business factoring services are expensive.

The most common misconception about invoice factoring services is – no surprise – related to the cost. Most charge a small percentage of the invoice total to provide your business with the immediate cash flow it needs to help meet your day-to-day expenses.

The reality is that no business can survive for long without a consistent stream of income.

Recent research suggests that nearly 60 percent of all invoices are paid late. Invoice factoring ensures that you’re not waiting for your money or wasting your time chasing down slow-paying clients.

Invoice factoring companies also provide additional services as part of your fee. These services – invoice creation and submission, collections, credit checks on your future clients — can be invaluable resources to busy small business owners who are wearing too many hats. Invoice factoring companies provide a team of back office professionals that keep your paperwork in check and make sure that you’re getting funded on the work you’ve completed.

When considering the working capital solutions for your business’s cash flow issues, it’s important to keep in mind the additional benefits included in the factoring services and calculate the overall benefit to your business. Outsourcing your invoicing and collections processes can lead to savings in time and money, allowing you to dedicate more resources to growing your business.

Of course, the exact fee and costs associated with factoring depends on your specific business situation.

Myth 2: My customers will look negatively upon invoice factoring.

Some people think that businesses using invoice factoring might be having financial issues or may not be seen as dependable vendors. More than that, some business owners worry that a third party provider contacting your clients to follow up on payment may be seen as more of a collections service rather than an extension of your accounts receivable department.

But the reality is that thousands and thousands of businesses use this form of accounts receivable financing for their small business funding. Increasingly, invoice factoring is becoming more common across industries, as companies look to streamline their account receivables process.

Some providers can even provide a white label service in order to make it appear as though invoices are sent to and from your business instead of a third party.

Myth 3: Invoice factoring companies won’t work with businesses that aren’t ‘established.’

Whether you just started a company, or you’ve been in business for a long time, if you have an invoice, you can take advantage of business factoring services.

The reality is that most startups don’t have enough credit to qualify for traditional loans and financing. Conversely, invoice factoring looks at the credit history of your clients when deciding to purchase your outstanding invoices.

Finally, it’s important to note that all types of small- and medium-sized businesses can take advantage of invoice factoring services. Also, invoice factoring companies consider a wide range of criteria when reviewing your application and accounts receivables.

The best way to knowing if factoring is a great short- or long-term fit for your business is to be as straightforward and direct about your financial history and situation as possible.

Myth 4: All invoice factoring companies are the same.

It’s easy to assume that all invoice factoring companies offer the same services, charge the same rates and have the same contract tetrms. But in selecting a factoring company, it’s important to remember that there can be significant distinctions among providers.

For instance, depending on your agreement, many factoring companies require you to submit all of your invoices for funding and maintain monthly minimums (or be charged a fee). Not all factoring companies have these policies, so it’s important to ask and to read and then reread your contract to understand what you’re agreeing to and for how long.

Ultimately, it’s important to understand the facts about the services provided by an invoice factoring provider and the services that they provide before you decide on a working capital solution. If you’re ready to move forward or have questions about invoice factoring, contact Triumph Business Capital today for a free rate quote.

 

 

Increase Cash Flow

3 Quick Ways to Increase Cash Flow

Cash is king. You know this as well as anyone else. Without cash, you can find yourself in some pretty uncomfortable situations, like not having enough money for payroll, or making late payments to vendors and bill collectors.

So what can you do to manage your cash flow effectively? Let’s take a look at three quick and easy ways to increase your cash flow—and help you sleep at night.

1. Sell or lease unused assets

You paid good money for your assets and, even if you’re no longer using some of them, it’s time to put that investment to work again. Take an inventory of the assets you’re not currently using and consider selling or leasing them.

How do you shed the assets? Use your industry contacts, such as suppliers, to find buyers or lessees. Also search for websites that specialize in auctions for your industry. For assets with significant value, contact a business broker.

2. Deposit additional cash into interest-earning accounts

This one’s a bit of a no-brainer. Let the banks work for you for a change. Deposit any cash you won’t need for a while into an interest-bearing account so it can grow. Look for an insured account with the highest interest your financial institution offers and let your money sit there.

Here’s a tip: If you’re concerned about locking your funds away in a long-term account like a certificate of deposit, consider a money market account instead. Money market accounts offer greater interest than regular savings accounts, while still giving you access to your funds. After all, cash flow is what you’re after—not more restrictions.

3. Factor your receivables

Invoice factoring is perhaps one of the smartest cash flow solutions out there. In fact, this is how many other small to mid-size businesses manage cash flow effectively.

You may be asking yourself: How does invoice factoring work? Here’s how. Simply send your invoices to a factoring company like Triumph Business Capital and we’ll fund the money straight to your bank account—usually within 24 hours.

Keep in mind that we verify the creditworthiness of your customer. If the customer has a history of missed or late payments, the invoice may not be approved for the financing.

Get paid today

We believe that getting paid shouldn’t be the hardest part of your job.

When you factor your invoices with Triumph, you’ll also gain access to a host of back office solutions. Solutions like free credit checks to make sure your clients have the ability to pay; and collection services to get your money from those who won’t pay.

Ready to get started? Factor your invoices with Triumph Business Capital and get paid today.

 

Invoice Factoring

Debt Collection vs. Invoice Factoring: What’s The Difference?

It’s not only been days, but weeks—or even months—since you performed work for your client, and you still haven’t received payment. Sound familiar?

As a professional, you need to be paid on time. You’ve got people to support and bills to pay. You may be considering using a debt collector to secure payment from your customer. Or, you may have considered proactively factoring your invoices with a trusted, credible factor. But which one is the smarter option. Are there any hidden implications you should be considering before making your decision?

The answer is yes. There’s actually a huge chasm between debt collection and invoice factoring. Think through these three key differences before reaching out to either one.

1. Purpose

The primary purpose behind using a debt collector is very different from the reason you’d use an invoice factor. While invoice factoring involves current unpaid invoices—no more than 30 days old—debt collection deals with invoices that are at least 60 days past due.

Debt collection

If you’re still trying to get paid months after you’ve completed the work, it might be time to check in with a debt collection agency.

Invoice factoring

If you prefer timely payment for your work instead of relegating your receivables to the bad debt file, you’ll want to connect with a reputable invoice factor like Triumph Business Capital.

One of the benefits of working with an established and reputable factor like Triumph is that we’ll not only factor your invoices; we’ll also provide a host of back office solutions—including debt collection—to ensure that you get paid on time for the work you perform. Welcome to the best of both worlds.

2. Funding timeline

How much longer are you willing to wait to be paid? The difference between how long it takes a debt collector to get funds to you and how quickly an invoice factor sends you funds can be a game changer.

Debt collection

You’ll be paid, but only after the collection agency receives payment from your customer. That can take time—if it happens at all. Add an aggressive process that can alienate customers, and you may decide that engaging a debt collection agency just isn’t worth it.

Invoice factoring

With factoring, you simply sell your invoices at a small discount and get immediate cash for your business. How fast? You get paid before the factor receives any money from your customer—usually within 24 hours.

3. Fees

How much are you willing to pay to be paid? In an ideal world, the payment conflict wouldn’t exist. But in today’s environment, unfortunately, you often end up either arm wrestling your customers or throwing up your hands—a sure sign of giving up altogether.

Debt collection

When you hire a debt collector, you’ll likely pay a hefty 25% to 30% collection fee—which still beats giving up 100% of an unpaid invoice! But there’s an even better option.

Invoice factoring

Getting paid shouldn’t be the hardest part of your job. Invoice factoring isn’t free, but weigh its small price against its great advantages: you’ll receive an immediate payment from the factor—usually 70% to 100% of the invoice—followed by any remaining balance (minus a fee) as soon as the factor collects full payment from your customer.

Get paid today

Factor your invoices with Triumph Business Capital to get paid today.

When you factor your invoices with our team, you’ll also get access to a host of back office services like credit checks to make sure your clients can pay, and collection services to get your money from those who won’t.

Ready to get started? Factor your invoices with Triumph Business Capital today.

Invoice Factoring Service

Get Paid On Time While Maintaining Business Relationships

Let’s face it, money can get in the way of any relationship, whether business or personal. And small or mid-size business owners like you never want to compromise relationships with customers or vendors.

But without the funds to pay your bills on time, how can you avoid damaging your relationship with your vendors? And how can you demand timely payment of your invoices without jeopardizing your relationship with your customers? What’s a small to mid-size business owner to do?

Managing cash flow takes diplomacy—and these three industry secrets.

1. Set up mutually beneficial payment terms

If, for example, a customer refuses to pay an initial deposit, but wants you to work on a large project that won’t be completed for months, you can negotiate progress payments. As you reach the agreed-upon benchmarks, you’ll receive partial payments, at least enough to cover your overhead and project costs. This will keep your contractors and vendors happy.

Your customer will benefit, too, by making smaller periodic payments instead of paying a huge lump sum upon completion, or even a hefty deposit with a large final payment.  

2. Pay your bills on time

Another key point is to pay your bills on time—always. Set up automatic payments so you never miss a bill payment. Timely payments go a long way toward improving your credit and your credibility. Vendors and contractors appreciate on-time payments and may even give your account preference over other businesses.

On the other hand, late payments can be a black mark against your business—vendors may not be as willing to work with you, and may stop extending credit or services.

3. Offer discounts for quick payment

Everyone likes to save money! Offer a discount off the top of your invoices if your customers pay within a specified period instead of waiting 30, 60, or 90 days to submit payment. Many will jump at this chance, and your offer will generate good will with them. It’s a win-win for everyone.

Get paid, today

Still struggling to get paid by your customers so you can pay your vendors? Invoice factoring can be an easy and effective way to manage cash flow while maintaining—and even improving—business relationships.

Simply send your invoices to a reputable factor like Triumph Business Capital so you can get paid today. When you factor your invoices with Triumph, you’ll get 70% to 100% of your funds upfront. And as we collect full payment from your customers, we’ll then pay you the remaining balance on your invoices, minus a small fee. In the end, you’ll get the cash you need to pay vendors and creditors quickly.

Since 2004, Triumph Business Capital has helped thousands of small and mid-size businesses manage their cash flow effectively. When you factor your invoices with our team, you’ll also get access to a host of back office services like credit checks and collections: We’ll make sure your customers can pay you, and we’ll get your money from those who won’t.

Ready to get started? Factor your invoices with Triumph Business Capital today.

About Invoice Factoring

Cash Flow Gaps? Boost Your Bottom Line with Invoice Factoring

You’re running a small or mid-size business and that takes money—lots of it. But coming up with the capital you need, when you need it, can often pose significant challenges—like how to meet payroll, pay vendors, upgrade equipment . . . the list goes on and on.

So how do you manage cash flow effectively? Let’s explore some common business cash flow problems and what you can do to turn those problems into productivity and profit.

4 common small business cash flow problems

1. Meeting payroll demands

As a small business owner, you know that payroll can take a large chunk of your budget each and every month, if not every week. At best, many small business owners lose sleep over payroll; at worst, some lose their business entirely.

Bankruptcies in the U.S. increased to 25,227 companies in the second quarter of 2016, from 24,797 companies in the first quarter of 2016. That’s a staggering number of businesses that closed shop in just this year alone.

Perhaps you can still keep your doors open, but just by a crack. You’re struggling every payday to meet the financial demand. You’re bound by the Fair Labor Standards Act (FLSA)—laws that set the minimum wage and establish guidelines regarding overtime—as well as state payday laws outlining when employees must be paid. No matter how much you want to treat your employees fairly, if you can’t meet those requirements, you could be in for it.

An employee who has a payroll grievance, whether about regular pay, overtime, or vacation pay, can submit a complaint against your company to the appropriate state or federal agency.

The result? An investigation by the agency, which may, in turn, lead to financial penalties, the loss of your business license, or a lawsuit against your company. Your business could be liable for back pay, fines, or other financial judgments—not to mention the collateral costs and work disruption associated with such investigations.

2. Maintaining a flawless credit score

Since your credit score plays a key role in the viability of your business, it’s important to keep a watchful eye on this number. At the very least, get a free credit report each year and make sure the information is both correct and current. You can request removal of any negative information after seven years, but don’t forget that you’ll have to wait up to 10 years for a bankruptcy to drop off your report.

If your credit score is less than a perfect, get back on track with these simple steps.

  • Pay your bills on time—always. Arrange automatic payments on every debt so you never miss a payment. Timely payments determine up to 35% of your score.
  • Keep open all accounts that are in good standing. These older accounts positively influence your length of credit history—about 15% of your score.
  • Apply for a credit card—but read the fine print for interest and fee information. Most importantly, only use the card for small charges you can afford to pay back every month.
  • Keep a low debt load—carrying more than 25% of your limit will increase your debt-to-income ratio and damage your score. Pay the bill on time and in full each month.
  • Don’t apply for more credit accounts than you need. If you must open new lines of credit, don’t try to open them all at once. Prospective lenders will check your credit, which lowers your score, and these pings stay on your record for two years, accounting for 10% of your score.
  • If you have a dispute about a debt, be proactive to communicate with the lender.  If all else fails, take the issue to small claims court before the debt gets into collections. Avoid lawsuits and judgments, too.
  • Review your credit report often, disputing incorrect information. You can get one free report each year, but monitoring its accuracy more often may be worth the cost as you’re rebuilding your credit.

3. Surviving slow-paying customers

You know the drill—you deliver your end of the bargain; you invoice; and then you wait . . . and wait . . . and wait to be paid. All the while, you have overhead costs to cover, vendors clamoring for their money, and employees who need to be paid on time.

Maybe your payment terms are net 15, but your customers insist on their terms—net 30, 60, or even 120. You don’t want to lose their business so you reluctantly agree. Fair? Not at all. And, as you well know, waiting to get paid can have serious financial consequences, like not having enough money to run your day-to-day operations, much less expand your business.

You could, of course, apply for a line of credit or get a loan to help carry you through the month, but will you get approved? And with the piles of paperwork and myriad backup documents required—not to mention the back and forth with the bank—you could be practically out of business before the bank makes a decision, much less actually gives you the funds your business needs. And let’s face it: you simply cannot afford to wait all that time only to be turned down.

4. Avoiding unnecessary debt

“Debt” is a nasty four-letter word to a small or mid-size business. According to the U.S. Small Business Administration (SBA), roughly 50 percent of small businesses fail within their first five years, mostly because of insufficient capital, poor credit arrangements, and—you guessed it—too much debt.

Unfortunately, debt can be accumulated rather quickly when trying to boost cash flow or finance growth. Perhaps a business loan could help, but loans must be repaid—and with interest, which can add up significantly.

Fact is, unnecessary or additional debt can be the first step on the slippery slope toward Chapter 11 bankruptcy or even “Closed!”

Fortunately, you can utilize financing solutions other than bank loans—options such as invoice factoring—that won’t incur that four-letter “D” word or burden your business with additional cash flow hardship.

How to overcome cash flow gaps

With potential hazards lurking around every financial corner, how can a small or mid-sized business overcome cash flow gaps and boost its bottom line in this economy—or any economy?

Alternative lending

You could opt for cash flow solutions like alternative lending, but that can prove costly. If your loan is a payday loan, your payment will be withdrawn from your checking account every single day. If the money isn’t in your checking account, you’ll accrue additional fees, increasing the payoff amount and delaying the payoff date—damaging your bottom line by keeping your business in debt and paying exorbitant interest longer than expected.

Merchant cash advance

You could also consider a Merchant Cash Advance, which charges you based on your projected sales. But this, too, can be costly—and risky. If your future sales don’t meet your projections, you could end up repaying more than you actually sell, and at a high interest rate. While invoice factoring offers a genuine cash flow solution by purchasing your existing invoices, a merchant cash advance can actually add to your stress.

Invoice factoring

Invoice factoring answers each of these financial challenges. Here’s how it works.

You simply sell your invoices, minus a small discount, to a factoring company like Triumph Business Capital. After checking out the creditworthiness of your invoiced customer, the factor advances 70% to 100% of the invoice amount to you as immediate cash for your business.

In a recourse factoring agreement, you’re likely to see 100% advanced, while a transportation company with a non-recourse factoring agreement would likely see a 90% to 97% advanced, and a small business with a general factoring agreement would likely see 70% to 95% advanced. And when you customer pays the invoice, the factor remits the balance, minus a fee, to your business.

So instead of waiting 30 to 120 days—or even longer—to receive your customer’s payment, you get cash in hand within 24 to 48 hours.

Triumph offers both recourse and non-recourse invoice factoring for approved clients. With non-recourse factoring, you’re not liable if your customer doesn’t pay your invoice for credit reasons. Since the factor assumes all risk with non-recourse invoice factoring, your business reduces bad debt while increasing cash flow, even if your customer never pays the invoice.

Here’s why invoice factoring might be right for your business.

Get more cash for immediate needs

Invoice factoring helps relieve payroll pain, giving you ready cash to meet weekly, bi-weekly, or monthly payroll. Need to stock up on supplies? No more waiting for your customers’ payments so you can purchase supplies or pay vendors. How about the rent or mortgage payment? Invoice factoring can take the stress out of meeting all your first-of-the-month commitments.

Get more cash for growth opportunities

With invoice factoring, you can expand operations, hire more staff, or develop a new product line. Your customers’ unpaid invoices no longer hold your business hostage, stifling your progress. And unlike a conventional loan, there’s no limit to the amount of financing with Triumph. The cash you receive for your invoices is unrestricted—you don’t need Triumph’s approval to use it for whatever your business needs.

Get more cash without more debt

Sure, bank loans or lines of credit could shore up your finances. But would your business be approved? How long would that take? And at what cost? Invoice factoring gives your business the cash you need quickly and easily. It doesn’t show up on your balance sheet as debt and your business won’t have to make onerous interest payments. Invoice factoring doesn’t negatively impact your credit score either.

Let Triumph help you boost your bottom line today

We believe that getting paid shouldn’t be the hardest part about your job. Since 2004, Triumph Business Capital has helped over 7,000 small and mid-size businesses in the U.S. manage their cash flow.

As your partner, we’ll factor your invoices so you can get paid today—and make your financial challenges a thing of the past. And in addition to helping you manage cash flow through invoice factoring, we offer a host of other business services through our parent company Triumph Bancorp to help you do what you do best.

Asset-based lending

Does your business need $1 million or more? Triumph Commercial Finance Business Capital offers asset-based lending (ABL) solutions for small and mid-size businesses. As your company steps up to this next level, Triumph Commercial Finance may be your best option for continued growth.

Defined as a loan or line of credit secured by balance-sheet assets (“collateral”) such as accounts receivable, inventory, etc., ABL typically costs less than invoice factoring. However, its loan underwriting process also has more requirements, including CPA-reviewed or -audited financial statements that reflect favorable earnings and tangible net worth. Additionally, ABL can be more restrictive than invoice factoring.

Equipment financing

Triumph Commercial Finance also specializes in equipment financing for the construction, refuse, and transportation industries—so you can upgrade your operations to grow your business or expand your footprint. Loans for purchasing new or used equipment range from $250,000 to $6 million, and loan terms are typically two to five years.

Back office solutions

Invoice factoring at Triumph Business Capital includes a slew of helpful back office solutions like free credit checks, collection services, data storage, and more. It’s our goal to help you reduce overhead costs and simplify your operations.

Take the guesswork out of taking on new clients. Triumph Business Capital offers free credit checks to help you make informed decisions before signing a new contract. And our online portal gives our trucking clients access to freight broker credits that we monitor daily.

After you’ve provided the contracted goods or services, our Account Resolution team will ensure that you receive timely payment. What’s more, Triumph Business Capital provides account management reports online—conveniently available to review at any time—so you can make smart business decisions based on your actual data (ageing reports, collection reports, etc.).

Insurance services

Need insurance at competitive rates? Triumph Insurance Group Business Capital offers a wide range of insurance options for the transportation industry, as well as damage protection for new and used equipment. Get the property and casualty insurance coverage that’s right for you—and at the best price, with affordable payment options.

 


Let’s get you paid today

Triumph Business Capital is committed to helping small and mid-size businesses manage cash flow and so much more. End late payment worries and slow cash flow problems. Factor your invoices and get paid today with Triumph Business Capital.

Small Business Factoring

How Much Does Invoice Factoring Cost?

Don’t you love that feeling—you know, the one you get when an invoice pays? With invoice factoring, you don’t even have to think about processing invoices, and you can forget about having to wait 30, 60, or 90 days to receive your client’s payment. You can actually get paid today. When calculating the cost of invoice factoring, it’s important to remember the benefits it can provide to small businesses and to always consider your own business situation and goals. 

The many benefits of invoice factoring

No more invoices to process, no waiting for clients to pay, and immediate cash in hand—invoice factoring services simplifies your bookkeeping experience and helps you get paid on time every time.

According to the Wall Street Journal, “The factor advances most of the invoice amount—usually 70% to 90%—after checking out the credit-worthiness of the billed customer. When the bill is paid, the factor remits the balance, minus a transaction (or factoring) fee.”

The benefits of invoice factoring are many, but how much does it actually cost? In this article, we’ll explain everything you always wanted to know about invoice factoring (but were afraid to ask).

Non-recourse factoring vs. recourse factoring

With non-recourse factoring, the factor assumes all the risk of collecting the debt. That’s a lower-risk option for small companies that can’t absorb the cost of unpaid invoices, but it does cost slightly more than recourse factoring.

Larger corporations often favor recourse factoring because, if a customer fails to pay, they can afford to return the funds they received from selling the uncollectible invoice to the factoring company.

Aside from the cost differential between the two, there are times when the cost differential is not justified by the credit risk being taken.

For example, if you’re selling to WalMart or the Federal Government, the chances of either one not paying because of credit reasons are quite small. Thus, paying a premium for non-recourse starts to look a little less attractive. If you do elect for non-recourse factoring, pay special attention to the Security Agreement that you’ll be required to sign and make sure you ask the factor to specifically go over when you will be covered and when you will not be covered from credit risk.

Whether you opt for a non-recourse or recourse factoring agreement, if your customer pays the invoice in 45 days or less, your total factoring cost with Triumph Business Capital would average approximately 3.9% of the invoice. However, different factoring companies determine what fees they’ll include, and these fees can drive up the cost of their services.

So how much does invoice factoring cost? 

Fees vary from factor to factor, so check with your factor before getting started.

Application/Due Diligence Fee

Some factors charge this fee some do not. Those that do not may recover this upfront expense by increasing the initial financing fees. This fee varies highly from factor to factor and can cost anywhere from zero to thousands of dollars.

Closing Fee

The factor retains a percentage of each invoice, typically 1–3%.

Monthly and Termination Fees

Some factors may require that you sell a certain amount of your invoice each month and sign a long-term contract. If the monthly target isn’t met, a minimum monthly fee will be charged. Terminating the contract early can trigger a cancellation fee—typically a percentage of your line of credit.

Discount Fee

The cost of paying for your invoices in advance can vary anywhere from 1.5–5% of the invoice value each month. This wide disparity is yet another reason to check with your factor before jumping into a relationship.

Factoring Fee

If your invoices go beyond the 30–45 days covered by the advance discount fee, you can expect an additional charge of 2–3% or more for every 30 days that the receivable is outstanding beyond the original 30 days. Some factors may prorate the fee daily, while others may charge on a 10-day basis.

Triumph’s Factoring Fee depends on your unique factoring agreement. Our factoring experts considering whether you’ve chosen recourse or non-recourse factoring, the credit quality of your customers, and more. But in general, let’s say you decided to factor a maximum of $3,000 with a 95% advance rate over a 90-day repurchase period. Meaning, you’d get paid $2,850 within 24 hours of signing your factoring agreement, and the final 5%—minus standard factoring fees—after 90 days. In this scenario, you’re likely to see an initial 0.40% factoring fee totaling $12.

While the scenario we just presented is common, it’s important to remember that your factoring fee will vary depending on the terms of your factoring agreement.

How does Triumph Business Capital compare to other factoring companies?

Now that we’ve broken down the fees, let’s get into specifics. While not all factors are entirely transparent with their pricing, we’re an open book. The last thing we want to do is surprise you with a fee. Here’s how our pricing structure compares to other popular factors you may have heard of.

Other companies charge flat advance rates of 10–15% and $15 per wire, but offers free ACH transactions. Some don’t include a setup fee, but they charge a fee based on the advanced amount.

Triumph Business Capital, on the other hand, works with your business to fit your budget and requirements. Triumph takes into consideration the credit risk associated with your customers, the time it takes them to pay their invoices, and the monthly funding volume we forecast for your business.

Can invoice factoring save you money?

Consider this simple illustration. You decide that invoice factoring is the best option for your business, so you convert your invoices into cash instead of waiting a month or more to get paid.

With immediate cash in hand, you can stop worrying about how you’re going to pay your bills and get on with the growing your business. And when you pay vendors more quickly, you can take advantage of their discount offers, which saves you money. You’ve not only gotten invoice collection off your plate, you’ve paid your bills and saved money in the process—and that’s good business.

Calculate The Cost To You...

Let's take a look. Pricing for both options will vary considerably based on business size and other criteria - so feel free to enter the information most appropriate to you.

Cash Advance Loan
$97,000
125
$1,000
$125,000
109%
Invoice Factoring
$114,000
21%
Your Effective Annual Interest Rate
Cash Advance Loans
109%
Invoice Factoring
21%

Cash Available For Operations
DISCLAIMER

The above calculations incorporate estimated values and are intended for comparative illustration purposes only. Terms and conditions of specific cash advance loan and/or factoring agreements may result in additional margin of error. If, for any reason, you suspect the results are not representative - please contact us directly so that we may address those concerns. Alternatively, the most accurate way to calculate the Annual Percentage Rate for a loan or competitive factoring facility may be to contact the financial service provider directly and request that they perform or confirm the calculations. Thank you.

Get paid today

The hardest part about your job shouldn’t be getting paid. Let Triumph Business Capital help you factor your invoices and get paid today.

 

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Invoice Factoring Companies

Invoice Factoring vs. Traditional Bank Loan: What’s The Difference?

Invoice factoring and a bank loan have very little in common—other than the fact that both provide cash to small businesses. Here’s a simple factoring vs. bank loan comparison to help you decide which can work for your business.

Invoice factoring

With invoice factoring, you simply convert your invoices into immediate cash to cover operating costs without taking on debt. You sell your invoices at a small discount to a factoring company like Triumph Business Capital and get immediate cash for your business.

Worried about your credit? No problem! Invoice factoring is primarily based on the quality of your customers’ credit, not your own credit or business history. While most banking institutions look at the same documentation we do, our focus primarily on the quality of your customers. Don’t let the successes and failures of your business journey stop you from getting paid.

Plus, invoice factoring works fast. You’ll typically receive approval in about 24 hours. Better yet, there’s no debt to repay, and you have unlimited funding potential.

As long as you have invoices, you have the opportunity to convert them into cash. Even startups are eligible for factoring.

Traditional bank loan

Compare that to a bank loan. You pay principal and interest over time, and the funding potential is capped by the bank. After completing all necessary paperwork, the approval process can take months—and it’s based on your company’s operational and credit history. If you’re a startup, chances are you won’t be approved for bank funding.

Additionally, bank loans and lines of credit often carry what’s called a loan covenant. Essentially they’re conditions in a commercial loan that require you to fulfill certain financial performance requirements. If you don’t meet the covenant requirements, you can default on your loan or line of credit. If your bank representative is nice, they may waive the default and charge an additional waiver fee. In the end, it’ll likely cost you more than you bargained for.

 

Bank loans or lines of credit also come with restrictions that forbid you from taking certain actions like purchasing or selling assets for your business, incurring additional debt for any reason, and more. Because of restrictions, you’ll often find yourself with the financial resources you need without the freedom to use them to solve your biggest business problems.

 

While a “line of credit” implies that you’ll be financed for whatever you need up to a certain amount, more often than not, that’s not actually what happens. Your credit line often comes with so many restrictions that it’s often easier to look for the next best option.

 

Which is best for your business?

If you own a business that has a long history of favorable cash flow and profits, or is well-capitalized, then a bank line of credit might be the right choice. But if you’re a new business—or one that may have had a significant hiccup somewhere along the road—then there’s no comparison.

Invoice factoring gives you immediate cash flow without creating debt on your balance sheet, and it’s virtually an unlimited source of working capital.

While banks require a wide range of collateral and financial statements, often refusing businesses that need additional funding but can’t meet the stringent borrowing requirements to qualify for a new bank loan.

Why Triumph Business Capital?

When considering factoring, it’s important to work with a reputable factor with a strong track record. Triumph Business Capital has provided factoring for over 7,000 small to mid-sized businesses since 2004. We have a long history with the transportation industry—and staffing agencies, government contractors, and small businesses are increasingly seeking us out to help solve their cash flow challenges. Triumph also offers smart Asset Based Lending and Equipment Financing options as well as a discount fuel card program.

Triumph is a proud member of the International Factoring Association (IFA) and strictly adheres to the IFA’s code of ethics. Originally called Advance Business Capital, the company joined Triumph Bancorp Group in 2012. As a financial holding company, Triumph Bancorp, Inc. maintains a diversified line of community banking, commercial finance, and asset management activities. Since day one, our vision has been centered on four core business priorities—delivering value, developing people, demonstrating expertise, and displaying a commitment to enterprise success.

Factor your invoices today

Ready to get started? Let Triumph Business Capital help you factor your invoices—and get you the cash you need when you need it.

Accounts Receivable Financing

4 Funding Options for Your Small Business in 2018

What are some of the popular types of short-term funding available to small businesses? How can you fund your business? You’ve got questions; we’ve got answers!

 

1. Bootstrapping

Bootstrapping is a funny word for a smart financial concept. The term comes from the phrase “pulling oneself up by one’s bootstraps.” An individual is said to be bootstrapping when he attempts to found and build a company from personal finances or from the operating revenues of the new company. According to Investopedia, more than 80% of new startup operations receive their funding from the founder’s personal finances.

 

So where exactly does the bootstrapper get startup funds? A bootstrapper may pull from a savings account, use zero interest credit cards, or leverage personal assets like selling a house or car and cashing in on a 401(k). With bootstrapping, the business is your own—no answering to investors like venture capitalists.

What are the benefits and drawbacks of bootstrapping?

Business owners who utilize bootstrap funding don’t have to worry about diluting ownership between investors. They don’t need to issue equity, and they can focus debt on personal sources. The downside? Unnecessary financial risk is all on the entrepreneur. And bootstrapping may not provide enough investment for the company to become successful at a reasonable rate.

What other companies have used bootstrapping?

If you decide to bootstrap, however, you’ll be in good company. Dell Computers, FaceBook, Apple, The Clorox Company, and The Coca-Cola Company each catapulted to greatness from humble beginnings as a bootstrapped enterprise. To learn more about bootstrapping, Fast Company offers 10 tips for bootstrapping your startup.

 

2. Friends and family

Of course, you can always tap into friends and family. With business plan in hand, pitch your idea to those closest to you, explaining what you’re selling, what you plan to charge, and how they’ll make money by backing your business.

What are the benefits and drawbacks of tapping into this method?

Be upfront about the risks and put the rules behind the investment in writing. Whether you’re asking for a loan, an investment, or even a gift, remember that each one comes with strings attached.  In the case of loans and investments, you will have to pay the money back: you cannot file bankruptcy if the business fails.

 

Entrepreneur.com offers tips and tactics in Five Tips for Asking Friends and Family for Funding.

 

3. Loan or Line of Credit

You can also apply for a loan or line of credit. What’s the difference? A loan is a specific amount disbursed to you at once in a lump sum. It has a fixed or variable interest rate, and a fixed repayment term. On the other hand, a line of credit functions much like a credit card. You’re given a maximum amount that you can use over a period of time, and you can borrow against that amount as you need money.

What are the benefits and drawbacks?

Once you’re approved for a line of credit, you can tap into it at any time to access the amount your business needs. You can also use a line of credit as an alternate overdraft protection option on a checking account. Keep in mind, though, that excessive borrowing against a line of credit could get you into financial trouble as surely as continuing to rack up credit card debt.

 

Want to know more about the benefits and drawbacks of traditional bank loans? We just wrote an article to compare and contrast traditional bank loans and invoice factoring. Read the full article here.

 

4. Invoice Factoring

Invoice factoring can be a small business owner’s best friend. It’s been around for over 4,000 years, dating back to the time of King Hammurabi of Mesopotamia. In the 1900s, the most popular industries for invoice factoring were the garment and textile industries. Today, the transportation industry, staffing agencies, government contractors, and small businesses are taking full advantage of invoice factoring. The reason? It helps relieve the stress of cash flow and slow-paying clients without adding debt.

How does invoice factoring work?

Here’s how: you sell your invoices at a small discount to a factoring company like Triumph Business Capital and get immediate cash for your business. Since 2004, Triumph Business Capital has provided factoring services for 7,000 small to mid-sized businesses throughout the U.S.—so you can be sure you’re working with a reputable company that has your best interests in mind.

Are there any drawbacks?

Invoice factoring can have higher fees than traditional financing, with fees based on sales volume and factoring agreement. But it’s a small price to pay for welcome relief and cash in hand. Learn more about the Common Risks Involved with Invoice Factoring.

 

What are the best options for short-term business funding?

Triumph Business Capital offers more than just invoice factoring. If your business has grown to the next level and you’re looking for a larger loan to pay for new equipment or provide additional working capital, Triumph offers smart Asset Based Lending and Equipment Financing options as well as a discount fuel card program.

 

Let’s Talk About Your Cash Flow

Take five minutes to learn more about how we help owner/operators increasing their cash flow.

Accounts Receivable Financing

The Ultimate List of Funding Options Every Small-Business Owner Should Know About

It’s a big world out there. We’re talking the world of funding for small- to medium-sized businesses. That’s why we’re giving you a bird’s-eye view of the available options—everything you need to know about funding your business.

Invoice Factoring

You may have heard of it; maybe you know a company or two that use it. But what exactly is invoice factoring?

 

Invoice factoring can be a welcome relief for a small business or government contractor—or any business owner tired of waiting for their invoices to be paid. You simply sell your invoices at a small discount to a factoring company and get immediate cash for your business. According to the Wall Street Journal, “Now billions of dollars in accounts receivable flow through factors each year.”

 

Should you consider invoice factoring for your small business?

Here’s what you should know about invoice factoring before diving in. Invoice factoring virtually eliminates cash flow problems. There’s no need to process invoices and wait—and wait—to get paid by your clients. No more putting plans on hold because there’s just not enough money to put them into effect. Or worrying about meeting payroll because you haven’t been paid yet. Non-recourse factoring even reduces bad debt since the factor assumes all risk if the invoice isn’t paid.

 

Got bad credit? Bank loan application already declined? No worries. Invoice factoring companies look at your credit and business history differently than a bank would. They base the majority of their decision on the quality of your customers’ credit and business history, not your own. The downside? Invoice factoring can have higher fees than traditional financing, but it can be well worth it when you consider its many advantages, including being able to sleep at night.

 

Whom should you trust?

It’s important, of course, to work with a reputable factoring company like Triumph Business Capital. Since 2004, Triumph has provided factoring for over 7,000 small to mid-sized businesses like yours—from the transportation industry to staffing agencies, government contractors, and other small businesses.

 

If your business has grown to the next level and you’re looking for a larger loan to pay for new equipment or provide additional working capital, Triumph also offers smart Asset Based Lending, Equipment Financing, and a discount fuel card program.

 

SBA Loan

The U.S. Small Business Administration (SBA) can also help finance your business with a guaranteed loan issued through participating banks and other lenders.

 

The most popular type of SBA financing is a General Business Loan, otherwise known as a 7(a) Loan. You can use the funds to establish a new business or assist in the acquisition, operation, or expansion of an existing business. The SBA guarantees loans up to $5 million to help small business owners with major investments, like building new facilities or buying land, machinery, and equipment. The SBA also offers loans that help small business owners affected by natural disasters and other kinds of emergencies.

 

Should you consider an SBA loan for your small business?
If you don’t qualify for a traditional bank loan, the government can help—although you’ll still need to work primarily with a bank. Aside from a low annual percentage rate (APR), you’ll receive funding in less than a month. Also, you’ll have more time to repay an SBA loan. If you use the loan for working capital or daily operations, you’ll have seven years to pay it back. Buying new equipment? You’ll have up to 10 years. If you use the funds for a real estate purchase, the terms go up to 25 years. A longer loan term means a lower interest rate and lower regular payments.

 

The application process, however, can be daunting. An SBA loan requires good credit and may call for collateral—and the paperwork can be both lengthy and cumbersome. The best way to navigate the process is to work with a bank that has extensive experience with SBA loans. The advantage? Lenders offer flexible terms and low rates since the federal agency guarantees the loans.

 

Alternative Lending

You’ve probably seen advertisements for alternative lenders like Kabbage, OnDeck, Lending Club, Prosper, Street Shares, and Deal Struck. Even PayPal has become a major player in the alternative lending space.

 

Alternative lending is a saving grace for some small businesses—especially if they need cash fast, or if bad credit disqualifies them for traditional lending. Sometimes referred to as “direct lending,” alternative lending provides cash in hand within two to three days on average, with a 12- to 36-month repayment period. And there’s no restriction on how to use the money.

 

Merchant Cash Advance (MCA)

MCA is an alternative financing source that provides businesses with a lump sum of cash by purchasing a set amount of their future sales. MCA companies debit your business account on a daily basis until the loan is paid in full.

 

Sound like invoice factoring? Not quite. Merchant cash advances and invoice factoring are both alternatives to traditional financing. Each involves a simple, quick application process with minimum credit requirements, making it easier and faster for small businesses to get approval—but while merchant card advances may seem like an equal option to invoice factoring, there are several catches.

 

Primarily, if your receivables are inconsistent, you may not have enough cash in the bank everyday that a withdrawal is made. At that point, you’ll overdraft on your account and experience the fees and penalties that follow.

 

Should you consider merchant cash advance for your small business?

Merchant cash advancements typically involve more risk than invoice factoring. A merchant card advance charges you based on your projected sales, while invoice factoring companies purchase your existing invoices. Since merchant cash advance payments are solely based on a prediction, rather than an actual dollar amount, this means that if your future sales don’t meet your projections, you could end up making large payments, with a much higher interest rate—usually significantly more than invoice factoring.

 

The larger problem could be that the payments continue for a period beyond your revenue generation. This form of cash advance is typically associated with incredibly high interest rates and should be avoided if at all possible.

 

Should you consider an alternative lending source for your small business?

The process for applying for alternative lending is fast and often easy. The loan application can be completed entirely online and approved in just a few minutes. Approval rates for alternative lending are much higher (64 percent, as opposed to about 20 percent for big banks, according to Inc.), and you could have your money in a matter of days, rather than weeks or months. Typical lending ranges from $10,000 to $100,000.

 

But alternative lending can be costly. In fact, the cost of these loans can be significantly more than the annualized rates associated with conventional financing. If your loan is a payday loan, beware. Your payment will be withdrawn from your checking account every single day. If the money isn’t in your checking account, you’ll accrue additional fees, increasing the payoff amount and delaying the payoff date. Another thing to keep in mind—be sure you’re working with the lending company that actually provides the financing, versus dealing with a broker, which leads to substantially more costs.

 

Microloans

Heard of microfinancing? It’s the new buzzword in funding circles, yet its concept dates back over 200 years. The first case of microlending, attributed to the Irish Loan Fund system introduced by Jonathan Swift, sought to improve conditions for impoverished Irish citizens.

 

So what is microfinancing? According to Investopedia, “Microfinancing provides options to customers with limited resources to promote participation in productive activities or to support a small business.” Simply put, it’s a type of banking service for unemployed or low-income individuals or groups who have no other access to financial services. Some microlenders even provide information in the areas of financial literacy, such as understanding interest rates and managing financial risks. Several organizations, including the Small Business Administration, offer microloans to help emerging businesses and underserved individuals get solid financial footing to start and grow their businesses.

 

The SBA offers microloans of up to $50,000 with a maximum term of six years. Administered through community nonprofits, the loans can be used for working capital or for the purchase of inventory, supplies, furniture, fixtures, machinery, or equipment. You can’t use the funds to pay an existing debt or to buy real estate.

 

Here’s how SBA microloans work: The SBA makes funds available to specially designated intermediary lenders—nonprofit organizations with experience in lending and technical assistance—including Justine Petersen, Grameen America, and Access to Capital for Entrepreneurs, to name but a few. These intermediaries then make loans to eligible borrowers. But before these lenders consider an application, qualifying for SBA microloan financing may require borrowers to complete specific training or planning—requirements designed to help you launch or expand your business successfully.

 

Other independent organizations—such as Bentley Microfinance Group, Association for Enterprise Opportunity, Business Center for New Americans, and Opportunity Fund—also provide microloans to the underserved community outside of the SBA model.

Should you consider a microloan for your small business?

A microloan is easier to get than a traditional loan, especially if your credit report is less than perfect or you don’t have a long credit history. If you don’t have a credit score, you can opt for a credit-building loan that lets you establish credit. On the other hand, a microloan usually costs more than a traditional bank loan.

 

Additional Government Funding Options

The federal government isn’t the only agency that can help your small business get off the ground and grow. Every state and many local governments have economic development agencies dedicated to helping both new and established businesses to grow and succeed. These agencies offer such services as start-up advice; training and resources; financial assistance through loans, grants, and tax-exempt bonds; business location and site selection assistance; and employee recruitment and training assistance.

 

Some states also provide grants for expanding childcare centers, creating energy-efficient technology, and developing marketing campaigns for tourism. These grants usually require the recipient to match funds or combine the grant with other forms of financing, such as a loan. The amount of available grant money varies, depending on each grantor and the type of business to be funded.

 

In addition to loans, the SBA also offers grants to nonprofit and educational organizations in many of its counseling and training programs. However, the SBA does not provide grants for starting or expanding a business.  

 

Here’s another way the government can help put dollars into your business. The Small Business Lending Fund (SBLF), enacted into law as part of the Small Business Jobs Act of 2010, provides capital to qualified community banks and community development loan funds (CDLFs) to encourage small business lending.

 

What does that mean to the small-business owner? Your community bank can be a resource for commercial and industrial loans; owner-occupied nonfarm, nonresidential real estate loans; loans to finance agricultural production and other loans to farmers; and loans secured by farmland.

 

If you’re in the biomedical space, the National Institutes of Health (NIH) can be another resource for your business. The NIH is the largest public funder of biomedical research in the world, offering funding for many types of grants, contracts, and even programs that help repay loans for researchers.

 

Should you consider government funding for your small business?

Government funding may come with free technical assistance, including workshops, seminars, or onsite consultations. Sometimes government agencies bring together all the recipients of a particular grant, facilitating peer-to-peer learning. These gatherings often provide grantees with their first introduction to others delivering similar services in the same city—which, in turn, can lead to more potential funding or resource-sharing opportunities.

 

However, as you’d expect, a great deal of red tape goes hand-in-hand with government funding. We’re talking time-consuming paperwork, meticulous recordkeeping, and demanding reports. And you can anticipate that the agency providing government funds for your program will closely monitor the use of those funds. It’s also possible that the receipt of government dollars will discourage donations from private sources.

 

Crowdfunding

It all started in 1997, when a British rock band funded their reunion tour through online donations from fans. Since then, crowdfunding has become a smart option for entrepreneurs and others to raise money, awareness, and support for a business or a project, especially when turned down by traditional lenders.

 

Through online platforms like Kickstarter, Indiegogo, Fundly, RocketHub, and Fundable, your small business can receive needed funding, with donations ranging from as little as $5 up to $5,000 and more. In exchange, your business offers rewards like T-shirts, tickets to shows, or perhaps a personal call from the founder of the company. The better the reward, the better the chance of donations.

In addition to soliciting donations, you can use the crowdfunding concept to get a loan. The site LendingClub, for example, allows members to directly invest in and borrow from each other, essentially eliminating the banking middleman.

 

Should you consider crowdfunding for your small business?

According to the research firm Massolution, the estimated fundraising volume for global crowdfunding is a whopping $34 billion. But while there’s money to be had, crowdfunding has its drawbacks as well. If you don’t have a great story to tell or a terrific product to sell, then your crowdfunding bid could fail. Some crowdfunding sites don’t collect money until a fundraiser reaches the goal. If your efforts fall short, you’ve wasted a lot of time, energy, and other resources. And then there’s the risk of getting sued if you fail to deliver your rewards.

 

Venture Capital

VC—venture capital—spells big bucks to some companies. An entrepreneur will seek this type of equity financing when the company’s size, assets, or stage of development precludes more traditional funding sources, such as public markets and banks. Venture capitalists generally invest cash in exchange for shares as well as an active role in the invested company.

 

Should you consider venture capital for your small business?

Venture capitalists typically focus on young, high-growth companies, invest equity capital rather than debt, offer a longer investment horizon than traditional financing, and actively monitor the companies in their investment portfolios. Lenders like EarlyShares and MicroVentures generally require some equity cushion or security (collateral) before they will lend to a small business.

 

Venture capital provides businesses a financial cushion, but at what cost? Equity providers have the last call against the company’s assets and require a higher rate of return or return on investment (ROI) than lenders receive. So it’s vitally important to weigh the pros and cons before engaging in a venture capital relationship.

 

Angel Investment

Many startups opt for an angel on their shoulder. Angel investors provide funding for early-stage or startup companies in exchange for an equity ownership interest. Often referred to as a business angel, informal investor, angel funder, private investor, or seed investor, the typical angel invests anywhere from $25,000 to $1.5 million.

 

How do you find an angel investor? Forbes lists a variety of ways—through other entrepreneurs, lawyers, and accountants; AngelList; crowdfunding sites like Kickstarter and Indiegogo; or through a colleague or friend of an angel.

 

Check out organizations like CircleUp or Gust that provide online platforms to connect entrepreneurs with angel investors. CircleUp offers the largest online marketplace for investing in innovative consumer and retail companies. Gust connects startups with over 1000 investment groups around the world, resulting in more than $1.8 billion invested in startups to date.

 

Should you consider angel investment for your small business?

Angels can be a Godsend for a startup and the investment usually comes in the form of a lump sum. However, angel investors expect a high rate of return, often 25 percent or more. And as a major investor, your angel may also feel entitled to some control over your company’s future.

 

The Bottom Line

At the end of the day, when you’re considering how to fund your business idea, the best option is one that helps you achieve your business objectives with minimal risk or high rates. That often turns out to be invoice factoring with Triumph Business Capital. Triumph believes the hardest part about your job shouldn’t be getting paid. Get paid today.

 

Have questions about invoice factoring or the options listed above? Please leave us a comment below.

Factoring Funding

Is Invoice Factoring Right For You?

Invoice factoring is a saving grace for many industries, from transportation and staffing to small and mid-size businesses as well as government contractors. In fact, invoice factoring can offer welcome financial relief if you’re just starting a business, have bad credit, can’t get funding from banks, or are at risk of losing your business.

A simple process

Invoice factoring lets you convert your invoices into immediate cash to cover operating costs without taking on debt. You simply perform a service for your customer or deliver a product, and send your invoice to a factoring company like Triumph Business Capital to get paid. You immediately receive payment upon completion of the load or job being invoiced.

The process is simple and virtually seamless. Triumph purchases the invoice. If you’re a recourse client, Triumph takes the factoring fee out, then a small portion of that invoice goes into a reserve account, usually 5 or 10 percent. This “advance rate” of 90 or 95% is released once the invoice is paid.

If you’re in a non-recourse agreement, you receive 100% of invoice minus the factoring fee. Since the factor assumes all risk in this type of agreement, there is no reserve held in the event that an invoice does not pay.

The pros

You get money when you need it.

Invoice factoring is fast cash in the bank to help cover day-to-day expenses, restock materials, pay staff—or just about anything you need. The alternative? Wait . . . wait . . . wait . . . and then wait even longer—30 days, 60 days, or more—to get paid by clients. But with fast cash in hand, you can keep loyal customers on longer payment terms.

Your invoice factoring company grows with you.

Compare invoice factoring to a traditional bank loan and there’s no competition. Bad credit? Limited operating history? Loan declined? No problem. Invoice factoring companies base their decision on the quality of your customers’ credit, not your own credit or business history. You get cash based on your invoices, not your company’s net worth.

The cons

You might pay higher fees than traditional financing.

Invoice factoring can have higher fees than traditional financing—but it’s a small price to pay for peace of mind. Triumph’s fee takes into account the credit risk associated with your customers and the time it takes them to pay their invoices. In fact, invoice factoring provides cash flow that meets your business where it is today and can grow as your business grows because it’s based on your actual account receivables.

Always transparent, always fair, Triumph Business Capital offers options that match each client’s financing needs without incurring debt.

Your factor may work directly with your customer.

Invoice factoring companies work directly with your customers to collect payments on your invoices. You’ll need to ensure that the factoring company you choose is ethical, fair, and respectful. Triumph Business Capital is a proud member of the International Factoring Association (IFA), and strictly adheres to the IFA’s code of ethics. We ensure a smooth transition for both you and your customers.

Your financing depends on your customer’s credit.

Lastly, recognize that your customer’s bad credit may derail your financing. The factoring company may reject your invoices to any customer that isn’t creditworthy.

Three questions to consider

How do you know if invoice factoring is right for you? Ask yourself these three simple questions.

  1. Can my problem be fixed by factoring?
  2. Can I cover the cost of factoring and still make a profit?
  3. Are my customers creditworthy?

Ready to get started? Learn how Triumph Business Capital can help you factor your invoices—because the hardest part about your job shouldn’t be getting paid.

Business Factoring

4 Common Risks Associated with Factoring Your Invoices

Many businesses turn to Triumph business capital to get their invoices factored for relief from today’s financial pressures. Faster and easier than a bank loan, getting an invoice factored doesn’t rely on your credit or your years in operation. You simply convert your invoices into immediate cash to cover operating costs without taking on debt.

In some cases, factoring an invoice is the only way a business can get cash quickly. In others, it’s simply the smartest way to get cash today. But what risks are involved when it comes to factoring your invoicesinvoice factoring involve?

1. Can you trust the factor?

In its infancy, a few unprofessional factoring companies charged excessive fees and used deceptive business practices, giving the entire industry a black eye. Now, however, factoring is not only widely accepted; it’s a trusted funding source for businesses across many industries.

Of course, before entering into any business relationship, you should always exercise due diligence. Investigate how long the factor has been in business and find out where its headquarters are located. Check into the background of its management team. Go a step further and ask for referrals from current clients, and then research complaints or lawsuits using web searches, the Better Business Bureau, and your state’s Attorney General’s Office. Remember to trust your gut: if you feel you can’t build trust with the factor, walk away.

As a respected industry leader and a proud member of the International Factoring Association (IFA), Triumph Business Capital strictly adheres to the IFA’s code of ethics. Providing invoice factoring for over 7,000 small to mid-sized businesses since 2004, Triumph Business Capital is backed by the extensive assets of Triumph Bancorp, Inc., a financial holding company that maintains a diversified line of community banking, commercial finance, and asset management activities.

2. What about uncollectible invoices?

Triumph Business Capital offers two kinds of factoring arrangements to handle invoices—recourse and non-recourse. Both eliminate the hassles and headaches of collecting invoices, so you can spend more time growing your business, gaining more opportunities to find new shippers, or taking the next load because you’ve already been paid.

With recourse factoring, you ultimately take the responsibility for the payment of the invoice. If the customer doesn’t pay the debt, then the seller is liable to repay the factoring company. With non-recourse factoring, your company pays slightly higher fees, but takes on a lower risk. The factoring company assumes all the responsibility for collecting the debt. This lower-risk option is better for many small companies that can’t absorb the cost of unpaid invoices.

3. How will the factor communicate with your customers?

Triumph has designed a seamless process for our clients to transition to factor their invoices. To start, we create a lockbox to accept payments in care of your company. Either you create your invoices or we create them for you. In either case, all invoices are stamped by Triumph with a “Notice of Assignment.” Your debtor will know that the invoice has been assigned to Triumph Business Capital as a third-party partner to help you manage your Accounts Receivable financing.

4. Is your customer creditworthy?

Savvy business owners like you know that perfect customers are rare, and even your best customers may be slow to pay your invoices. At some point, your current or future customers may not be able to pay you at all.

That’s why it’s crucial to confirm your customer’s creditworthiness before conducting business with them. But routine credit checks can be a hefty expense for your business. Triumph Business Capital runs customer credit reports all day long—for free. It’s the Triumph advantage.

When you factor your invoices with Triumph Business Capital, we monitor the creditworthiness of your customers at every transaction. By doing so, we reduce the amount of risk you take, directly reducing the amount of invoices that get kicked back after 90 days. Invoice factoring is about reducing your financial risk, after all. Let’s get you paid.

The benefits outweigh the risks

Bottom line—the hardest part about your job shouldn’t be getting paid.

Factoring your invoice provides you with the immediate cash you need to run and expand your business. No more need to process invoices. Worried about your balance sheet? This financing doesn’t show up as debt. Factoring your invoices is easy, fast, and flexible.

Ready to get started? Factor your invoices with Triumph Business Capital today.

Factoring Invoices

How to Avoid the Net-30 Trap and Actually Get Paid

It’s a headache and a hassle, and it causes complete confusion—It’s the Net-30 Trap. Does it mean you get paid 30 days from the date on the invoice, 30 days after the client bills their client, or within 30 days of what exactly? Do you get paid at all? What is net 30 anyway?

It’s a power play—and you lose

Fact is, “Payment Terms Net 30” can mean different things to different people—but in most cases, the client wins. In essence, net 30 means you’re extending credit to your client long after you’ve delivered as promised. Fair? I think not.

Chances are, you’ve seen or heard about large companies using their purchasing power to force a supplier to agree to terms that are more favorable to the large company—like a longer period of time to pay or relaxed rules for returning goods. How about the promise of future work to keep you at arm’s length when it’s time to get paid?

If you’re like most trucking or staffing companies, small to mid-size businesses (SMB), or government contractors, you don’t have great cash flow or a big cushion to fall back on. That forces you to finance your customers and accept their net-30 terms, or worse—net 60, or even net 90—leaving you looking like less than a good risk for banks or anyone else checking into your creditworthiness. And with few assets to balance such cash flow challenges, you’re not likely to have leverage to increase credibility and trust.

Three courses of action—and you win

1. Charge interest

One tried-and-true method to help ensure you’re paid—on your terms—is to charge interest if payment isn’t received on time. After all, the threat of interest for late payments is part of our everyday life, from credit cards to loans and even utility bills. In some cases, charging interest may be enough incentive for clients to pay on time.

2. Factor your invoices

Invoice factoring helps take the 30, 60, 90—or never—financial burden off your shoulders, allowing you to pay your bills and staff, stock up on materials, and sleep at night. You simply sell your invoices at a small discount to a factoring company such as Triumph Business Capital, and get immediate cash for your business. Learn more about how invoice factoring works in Invoice Factoring: The Antidote for Net-30, 60, 90, or Never .

3. Walk away

Your last course of action is to be willing to walk away. If the deal looks bad, or too good to be true; if you’re worried about a prospective client’s ability or willingness to pay—walk away before it’s too late. In the short term, taking the job gets you the work; but in the long term, you’d be taking on trouble—big time trouble.

Already stuck in a situation where you’re doing work and still not getting paid? Stop the work; your client will see this and make paying you a priority.

It’s time to get paid

Let’s face it: the hardest part about your job shouldn’t be getting paid. Free your business from the Net-30 Trap and factor your invoices with Triumph Business Capital to get paid, today.

Invoice Factoring

Invoice Factoring: The Antidote for Net 30, 60, 90, or Never

You do the work, deliver the product or service, and wait. And wait. And wonder—will you get paid on time or have to make countless calls to get your money?

Let’s face it. One of the biggest challenges facing small and mid-size businesses (SMB) is getting paid—especially since many companies are increasingly stretching invoice payment from 30 days to 90 days or even longer.

In the meantime, you have employee salaries, vendor payments, and taxes to pay—regardless of whether or not your customer pays you. How, then, do you cover your day-to-day expenses, much less expand your business? You could, of course, apply for a bank loan and cope with its cumbersome paperwork, lengthy process, and restrictive funds limit—not to mention possible rejection. Or your can opt for a more business-friendly way to go—invoice factoring.

What is invoice factoring?

To understand invoice factoring, you have to understand what it is not. Invoice factoring is not debt collection—running after businesses to pay their bills. Nor is it a business loan or line of credit.

You simply convert your invoices into immediate cash to cover operating costs without taking on debt. Invoice factoring helps take the 30, 60, 90—or never—financial burden off your shoulders and, frankly, lets you sleep at night.

Invoice factoring goes by several names—accounts receivable financing, AR factoring, and invoice financing. No matter what you call it, the process is the same: you sell your invoices at a small discount to a factoring company and receive immediate cash for your business. No more need to process invoices. Depending on your agreement, bad debt is also reduced as the factor may assume financial risk if the invoice is not paid. The bottom line—invoice factoring gives you fast access to funds with greater flexibility, minus the bad debt.

Less stress, more cash

You could say that invoice factoring is a stress reliever. It takes the billing and collecting off your plate and transfers it onto the factor’s. It also gives you greater control of your company’s finances by providing the necessary capital when your company needs it. Say goodbye to your customers’ accounts payable procedures or terms, or a traditional bank’s underwriting processes or delays—and your own cash flow problems. How’s that for control?

Another benefit? With fast cash in hand, you can pay vendors more quickly and take advantage of their discount offers, saving you money.

How does invoice factoring work?

Unlike conventional lending methods, invoice factoring is based on the quality of your customers’ credit, not your own credit or business history. You receive cash based on your invoices, not your company’s net worth. That’s welcome relief for start-ups with minimal capital or for businesses experiencing financial challenges or bad credit. Worried about your balance sheet? This financing doesn’t show up as debt.

 

The factoring process works quickly and easily: you deliver a product or perform a service for your customer and send your invoice to a factoring company like Triumph Business Capital. You immediately receive a cash advance on your invoice from the factor, who then collects full payment from your customer, and pays you the balance of your invoice, minus a fee. After verifying the creditworthiness of your customer, the factor may not accept invoices for a customer that has a history of late or missed payments.

Invoice factoring vs. traditional loan

Still not sold on invoice factoring?

Consider this: bank loan processing can take weeks or longer. In that case, you might as well wait for the customer to pay you. Invoice factoring, on the other hand, is fast. You can be paid within 24 hours. You decide which invoices to factor and when.

Invoice factoring is also more flexible than a bank loan. You aren’t locked into a long repayment period. And the cash you receive for invoices is unrestricted—you can use the funds however you want. Compare that to a business loan that requires the money to be used for specific purposes.

Who factors?

Invoice factoring has been around for over 4,000 years, dating back to the time of King Hammurabi of Mesopotamia.

In the 1900s, the most popular industries for invoice factoring were the garment and textile industries. There was simply no better way to continue to buy raw materials to produce clothing and textiles.

In the 1940s, transportation industries were added to the roster of factoring participants. From the 1960s through the ’80s, rising interest rates and bank regulations made invoice factoring more popular because it didn’t require the same sort of credit checks. Today, small to mid-size businesses finance their working capital by factoring over $1 billion annually.

“Companies of all sizes, with annual revenues from $10,000 to $10 million, continually approach us for invoice factoring,” says Steven Hausman, President of Triumph Business Capital, an industry leader headquartered in Dallas, Texas. “We have provided factoring for over 7,000 small to mid-size businesses since 2004. We have a long track record with the transportation industry. Staffing agencies, government contractors, and small businesses are increasingly seeking us out to help solve their cash flow challenges.”

The difference between recourse and non-recourse factoring

Just as there are varying client needs, there are various types of factoring arrangements. With recourse factoring, the client ultimately takes the responsibility for the payment of the invoice. Larger companies often use lower-cost recourse factoring. If the customer doesn’t pay the debt, then the seller is liable to repay the factoring company.

Non-recourse factoring allows companies to sell their invoices to the factoring company, which then assumes all of the credit risks for the collection of the invoice. Triumph Business Capital employs non-recourse factoring and assumes all the risk of collecting the debt. That’s a lower risk option for small companies that can’t absorb the cost of unpaid invoices, but it does cost slightly more than recourse factoring.

A small price to pay for substantial relief

What will all this convenience cost you? Invoice factoring can have higher fees than traditional financing, with non-recourse factoring fees based on a variety of considerations.

During the application process, Triumph analyzes the credit risk associated with your customers, the time it takes them to pay their invoices, and the monthly funding volume forecast for your business.

Triumph then offers pricing options that match each client’s budget and risk tolerance. As an added benefit, factoring fees are deductible as a business expense.

Why Triumph Business Capital?

Triumph Business Capital is a proud member of the International Factoring Association (IFA), and strictly adheres to the IFA’s code of ethics.

Originally called Advance Business Capital, the company changed its name when it joined Triumph Bancorp, Inc. in 2012. As a financial holding company, Triumph Bancorp, Inc. maintains a diversified line of community banking, commercial finance, and asset management activities. Since day one, the company’s vision has focused on four core business priorities.

  • Delivering value
  • Developing people
  • Demonstrating expertise
  • Displaying a commitment to enterprise success

“Many clients have been with us since our early days—testament to the integrity of our service and dedication to their business,” says Hausman. “Our team is professional and courteous. We’re a partner with our clients to help them find success with their customers.”

Triumph customers couldn’t agree more. A senior executive at JP Transport, LLC spoke about Triumph: “I have been beyond impressed with the service from Triumph Business Capital. My payments are processed on time every time. The online submission process is fast and easy. Reports on various payment statistics are helpful. I’ve been contacted by Triumph staff just to check on how things are going. Couldn’t be more satisfied.”

Is invoice factoring right for you?

If you’re often caught in the net-30, -60, -90—or never—battle with customers, let us help you determine if invoice factoring is right for your business. Our answers to the following frequently asked questions may get you one step closer to the cash flow relief and improved client relationships that invoice factoring provides.

Q. How much do I have to factor?

A. You have total control over which invoices you want to factor and when. Keep in mind, though, that once you decide to factor one of your accounts, it’s generally required that you factor all the invoices for that customer in order to reduce payment confusion.

Q. What are the costs?

A. The fees for invoice factoring depend on several items, including your customer’s credit risk, how long they take to pay your invoices, and your monthly funding volume. Always transparent, always fair. In any case, your factoring fees will stay the same throughout your entire contract and are contract determined before we purchase your first invoice.

Q. What if I’ve been rejected for a bank loan? Will a factor reject me?

A. Unlike traditional lending, invoice factoring does not rely solely on your credit. Invoice factoring is based on the quality of your customers’ credit, not your own credit or business history.

Q. Can invoice factoring improve relationships with my customers?

A. Absolutely! First, invoice factoring can help increase your credibility. Here’s how: invoice factoring is a recognized, established method for a company to optimize cash flow. Since banks have tightened credit policies for small businesses and startups, many companies now use factoring instead. A factoring company’s willingness to finance your invoices serves as an endorsement of your business as a solid company and a good risk.

Invoice factoring also allows you to give more attention to your customer’s needs—instead of worrying about their payments. Triumph has a decade of experience and dedicated teams that work closely with you to handle the invoicing and collecting of payments. These courteous professionals partner with you to enhance the relationship you’ve built with your customers.

Transitioning to invoice factoring is seamless. Triumph stamps each invoice with payment instructions known as a Notice of Assignment. It’s a very smooth transition for both you and your customers.

Lastly, invoice factoring helps you keep better track of your invoices. Triumph’s online account management, for instance, provides a full array of client reporting and real-time information. The goal is to keep you totally informed on the status of your customers and accounts—and give you the cash you need, when you need it.

Trucking? Staffing? SMB? Government Contractor? Get paid today!

Any business owner or consultant would readily agree that getting paid shouldn’t be the hardest part of the job. Thanks to factors like Triumph Business Capital, it doesn’t have to be.

Freight factoring lets trucking companies get the show on the road. They can pay drivers, insurance, fuel, and other expenses on time, and never have to turn down another job due to lack of cash in hand.

Staffing companies can relax, knowing that they’ll make payroll on time, every time. Small and mid-size businesses can easily replenish their operating capital and get back in business. Government contractors can have the working capital they need to keep the company going strong, without monthly minimums, long-term requirements, or “risk” contracts.

If large invoices or slow payments are standing in the way of your company’s production and expansion, it’s time to learn how invoice factoring can work for your industry—and how Triumph Business Capital can help you get paid today. Get started now, and leave the net 30, 60, 90—or never—far behind.

Invoice Factoring Company

To Sign or Not to Sign – This is THE Question

When did signatures become so important?

If you were back in the year 1473 (Islamic calendar 877-878, Hebrew calendar 5233-5234), you would find it hard to find a writing implement to use, and it would probably be even harder to find actual paper on which to sign. We take these things for granted today, but back then, paper and pen were luxury items that only the rich and powerful had any use for.

Today we take signatures for granted – we sign credit card receipts, we sign for packages, we sign (repeatedly) when we buy a car, and we sign electronically when we buy things online. Have you ever stopped to think “what am I actually signing?” Have you ever actually read your credit card receipt? It says that you are bound by the terms and conditions of your credit card contract – and if you’ve ever taken the time to read that document, I think you’d be surprised what was in there!

The message here is: read before you sign. Understand before you sign.

You would never sign a document that said you promise to pay back $100,000 without knowing…

  • How long do I have to pay it back?
  • How much is it going to cost (interest, fees)?
  • Can the money be used for anything I want?
  • What are the penalties if I don’t pay it back?
  • What do I have to put up as collateral?

If you are browsing the internet and there is a form to fill out, make sure you pay close attention to that form and if there are any disclaimers on there. If there are NOT, then the factor cannot bind you to anything since nothing has been defined.

However if you see something that says “By clicking “submit” you agree to our standard terms and conditions”, you might want to know what the standard terms and conditions are before clicking the “submit” button! Maybe it’s no big deal and it’s OK, but maybe not!

What if by agreeing to the “standard terms and conditions” you’re agreeing to that factor filing a lien on all of your company’s assets as collateral for a loan you’ve not yet even received? You think I’m kidding….I’m not.

The moral of this is: know what you are signing. Do not commit you or your business to something unless you understand what it is and are 100% sure you want to move forward with what you are signing.

Non-Recourse Factoring

What is Non-Recourse Factoring?

You’re a small business owner and you need financing. The first stop is your local bank where you get the sympathetic shake of the head from the loan officer. “Sorry, we can’t help with a loan but how about a checking account?” A checking account isn’t going to cut it when you need cash for your business.

You have bills to pay. What now?

There’s invoice factoring, an option that puts money in your pocket fast—often the same day. With factoring, you sell unpaid invoices to a factoring company like Triumph Business Capital, which pays you the amount you’re owed on the invoice less a small fee, and then is responsible for collecting from your customer.

But what if your customer doesn’t pay?

There are two basic types of factoring: recourse and non-recourse. Recourse factoring is kind of like a loan in that if your customer doesn’t pay the invoice, you owe the money on that invoice back to the factor.

With non-recourse factoring, the factor evaluates the credit risk of your customer and agrees to take the loss if the customer can’t pay the invoice for credit reasons.

What Non-Recourse Factoring Doesnt Cover

The “for credit reasons” phrase is important.

Most non-recourse factoring contracts have a clause that says you are responsible when the customer refuses to pay an invoice because of a “dispute of any kind, regardless of validity.” When a customer says your delivery was late and is only going to pay 50% of the invoice, or holds up payment because there’s a document missing, these are not credit-related issues. The factor is probably going to ask you for its money back.

What Non-Recourse Factoring Does Cover

Let’s talk about what non-recourse factoring does cover.

If, during a collection call, your customer says something like, “We simply do not have the money to pay these invoices right now,” you’re protected. If your customer’s business fails or files for Chapter 11 bankruptcy protection, the factor will be the one standing in line at the bankruptcy hearing, hoping to get paid. After all, it bought the invoice based on the creditworthiness of your customer.

Non-Recourse Factoring Gives You Control

As you can see, there’s a theme here.

With non-recourse, if a factoring service agrees to buy an invoice and the customer can’t pay it for credit-related reasons, you’re covered. But if the customer won’t pay due to your performance, you’re not covered. That’s not such a bad thing because you don’t want a third party handling discrepancies with a customer anyway. You probably worked hard to earn that business and if something threatens the relationship, it should be up to you to address it.

An experienced factor knows how to evaluate credit risk in your specific line of work. If you find that your factor is routinely asking you to pay money back (a “chargeback”) on invoices that you thought were non-recourse, get specific. Ask for details. Is it related to something that can be tied back to you and the performance of your business? Or is there some other reason the factor can’t collect?

Non-recourse factoring is a common and convenient way to turn something of value—your invoices—into the cash you need. Not all factoring agreements are the same so it’s important to read the contract and ask questions when you have them. If it’s confusing or you’re not getting answers, then maybe it’s time to look at someone else to factor your invoices.

Invoice Factoring Service

Which is better — invoice factoring or a loan?

If you’re having trouble getting approved for a loan, you’re not alone. According to the 2014 Small Business Survey, 44 percent of firms who applied for loans failed to receive any credit. The biggest reasons? Low credit scores, insufficient collateral, and/or weak business performance. In recent years, it’s become more and more difficult for small businesses to access working capital from traditional funding sources.

Fortunately, a loan is only one of many possible solutions. In this article, we’ll compare business loans to invoice factoring, a little-known alternative funding source that could help your business reduce risk, and possibly even pay less than you might for a traditional business loan. If your business is in need of funding, but has a low credit score or limited collateral, you’ll want to check this out.

 

Fast Approval. Fast Cash.

Unlike loans, which have extensive application requirements and long approval periods the application process for invoice factoring is simple and quick. In most cases, you can receive your funds in as little as 24 hours.

 

Low Cost. No Interest.

Depending on your interest rate, payment terms, and the amount of your loan, the long-term cost of a loan could be much greater than the amount you intend to borrow. You’ll pay interest over the life of the loan, so carefully examine your amortization documents before signing on the dotted line. In some cases, you may pay as much as double the loan amount.

In contrast, with invoice factoring, you make no interest payments and no monthly payments, because the funds are not a loan. Rather, they are a sale of your accounts receivables (invoices) for work that your business has already completed.

 

Less Risk. Less Stress.

Risk is inherent in any loan. If your business does well, and you manage your profits responsibly, repaying your business loan may be no problem. However, if business is slow, or if you encounter unexpected financial hurdles, you may be unable to pay your loan, risking late fees, fines, and even insolvency. With invoice factoring, the risk is much lower, because you are not receiving a loan. The money you receive is yours — you are just getting it sooner.

Unlike a loan, which requires regular payments, the funds you receive through invoice factoring will be repaid when your client pays their invoice. If you choose recourse factoring, you will ultimately be liable to repay the funds if your client does not pay their invoice — but this risk can be mitigated with careful credit checks. In addition, many small businesses and entrepreneurs may choose non-recourse factoring, which releases them from liability in the event their clients do not pay the invoice. However, this type of invoice factoring is more costly to obtain. Learn more about the two types of invoice factoring here.

 

Simple. Repeatable.

While it is possible to get multiple business loans, your approval for each loan will depend on your credit history, which includes your debt-to-income ratio. This means that once you get one loan, it may be harder to get an additional loan until you pay off the first. Because invoice factoring does not involve a loan, but is instead based on your accounts receivable, you can use invoice factoring again and again. As long as you meet the invoice factoring company’s requirements, and your invoices are reliably paid in full, invoice factoring can become an integral part of your business’s long-term plan for growth.

If your business needs access to working capital fast, without the risk, which sometimes doesn’t come with traditional loans, ask us how Triumph Business Capital can help.

 

Factoring

Invoice Factoring vs. Merchant Cash Advance

Which do you need in your corner?

Back in high school and all of my college years, I was an amateur boxer with a real passion for the sport. Boxers function on muscle memory, which is why professionals like Manny Pacquiao are able to throw over a thousand punches in a single match. But the one thing you never get used to, is getting hit. Let’s face it, getting hit HURTS, and the punches that hurt the worst are the ones you never see coming.

Right around the time I stopped boxing, I started my first company. I soon realized that having the right capital for merchandise and other expenses was incredibly important. I also realized that owning a business means you’re constantly hit with countless direct mail offers advertising small business cash advances and high-risk loans. The ads promise quick access to cash, with approval in minutes, and funding in days — but are these small business loans really as good as they seem?

Most businesses need access to funding at some time or another, but all funding sources are not created equal. In order to get the working capital you need, while avoiding high fees and reducing risk, it’s important to understand the pros and the cons of any business funding source. In this article, we’ll explore what a merchant card advance is, its pros and cons, and how it compares to invoice factoring.

What is a merchant cash advance?

A merchant cash advance, also known as a merchant card advance or “MCA”, is an alternative financing source that provides businesses with a lump sum of cash by purchasing a set amount of their future sales. Businesses pay back the loan in monthly installments, which are deducted as a set percentage of credit card and debit card sales, until the cash advance is paid in full. This form of cash advance is typically associated with incredibly high interest rates and should be avoided if at all possible.

How does merchant cash advance compare to invoice factoring?

Like a merchant cash advance, invoice factoring is an alternative funding source that offers businesses fast cash, without the strict credit approval requirements of traditional loans. However, there are some key differences that may make invoice factoring a better choice for your business.

Faster Access to Cash

Merchant cash advances and invoice factoring are both alternatives to traditional financing. Each involves a simple, quick application process with minimum credit requirements, making it easier and faster for small businesses to get approved — but while merchant card advances may seem like an equal option to invoice factoring, there are several “catches” that may leave you financially K.O.’d in the long run.

Lower Risk

First of all, merchant cash advancements typically involve more risk than invoice factoring. A merchant card advance charges you based on your “projected” sales, while invoice factoring companies purchase your existing invoices (also called, “accounts receivable financing”). Since merchant cash advance payments are solely based on a prediction, rather than an actual dollar amount, this means that if your future sales don’t meet your projections, you could end up making massive payments, with a much higher interest rate (usually significantly more than invoice factoring). The larger problem could be that the payments continue for a period beyond your revenue generation – Similar to getting punched in the face over and over again, month after month (trust me, not fun).

The Golden Rule of Finance

Simply put, the best financing structures have terms which match the useful life of the assets being financed. It makes poor sense to finance a house for 36 months or a car for 30 years. If your cash needs are for working capital, consider the benefits of a financial solution that matches the need.

Lower Overall Cost

Unlike merchant cash advance providers, who not only charge you the amount of the payment, but a crippling, sky-high interest rate, most invoice factoring companies solely charge a small percentage of the invoice total.

Additional Back Office Services

Because invoice factoring companies purchase your unpaid invoices and proceed to collect payment from your vendor directly, you may also benefit from the back-office services these suppliers provide, including billing and collections.

Before you consider taking out a merchant cash advance, be aware of the short and long term repercussions. If you’re in a high-needs situation, their unsavory (and borderline usury) interest rates may seem worth it, but keep in mind that anything that looks “too good to be true,” usually is. It pays to have the right company in your corner, and if you’re interested in exploring your invoice factoring options, talk to Blaine Waugh at Triumph Business Capital. He’ll help coach you through the right solution for your business and won’t make you run laps or do sit-ups (unless you want him to)!

 

 

Triumph Business Capital

The Payroll Problem

Spend less time stressing about making payroll, and more time working on your business.

In February of 2012, when I was eight months pregnant, my husband’s employer filed for Chapter 11 Bankruptcy. We lost our health insurance (even though we had been paying the premiums), and my husband’s bonuses and vacation pay (even though he had worked plenty of overtime). To make matters worse, he and his coworkers did not get paid for the last two weeks before the company folded. Now, more than three years and one more child later, we’re doing fine — but things were pretty shaky for a while.

Most employees don’t think twice about getting paid on time — until the checks stop coming. The problem of “making payroll” is more widespread than you might think. Just over 900,000 bankruptcies were filed in 2014, and about 800,000 are predicted for 2015, according to creditslips.com. Truth told, all across the U.S., business owners and payroll managers are sweating making payroll each month. Many major businesses, including Radio Shack, Wet Seal, and SkyMall, have filed for Chapter 11 bankruptcy this year already.

While the major corporations are the ones that make the news, payroll concerns can be even more worrisome for small businesses and startups. All businesses are required by law to pay employees in a timely manner, yet their customers may wait 30, 60, or even 90 days before paying invoices. This gap between receiving payment for completed work and making payments to employees can leave small businesses cash-poor in the short-term, with the potential to push them over the edge of insolvency.

In today’s challenging economic climate, payroll concerns have become an almost inevitable part of doing business. However, it doesn’t have to be this way. For companies with verifiable invoices for completed work, who are simply waiting for payment, there’s a simple solution to the payroll problem. It’s called invoice factoring.

What is Invoice Factoring?

Invoice Factoring is the sale of a company’s invoices to a factoring company, which pays the invoice immediately, minus a small percentage for its services. The invoice factoring company then takes over collections for the invoice. The business client gets cash fast, which can be used to make payroll. And, the factoring company gets paid when the client pays the bill.

How can Invoice Factoring Solve Payroll Problems?

  • Protect Personal Funds

    When business owners can’t make payroll, they often turn to personal funds, including savings accounts, friends and family, or even retirement accounts. To avoid lawsuits, IRS problems, bankruptcy and worse, most companies will use any means necessary to ensure employees are paid on time. With invoice factoring, you don’t have to resort to drastic measures.

  • Avoid Taking on Additional Debt

    Business loans are another option for business owners. However, loans must be repaid, with interest. Further complicating the matter, many small business owners and entrepreneurs do not have the capital or credit history to qualify for loans. Unlike a loan, invoice factoring involves the sale of invoices. That means no drawn-out approvals, no interest payments, and no additional debt as long as the invoice is paid.

  • Prevent Layoffs

    The last thing any employer in a growing business wants to do is lay off employees — especially when new opportunities are coming into the shop. Instead of letting employees go when you need them most, just to make payroll, invoice factoring enables you to keep all hands on deck, and pay them on time.

  • Reduce Expenses

    In a recent article published on inc.com, Donald Todrin, founder of the Northhampton, MA-based Second Wind Consultants, recommends raising cash by requesting a reduced payment from clients, in exchange for wiring the money immediately. He suggests accepting as much as a 50 percent hit on outstanding receivables, in order to cover your payroll. Of course, for savvy businesses that partner with an invoice factoring company, the cost of immediate cash is much, much less. Triumph Business Capital only charges a small percentage of your invoice in exchange for immediate payment.

  • Take Care of Your Employees.

    It’s not just about avoiding lawsuits, federal and state tax liabilities, and IRS penalties. And it’s not even just about keeping your business afloat. Whether you manage payroll for a small business or large company, paying your employees on time is just the right thing to do.

As an employer myself, I take the responsibility of paying my employees in a timely manner very seriously — especially since I know what it’s like when an employer drops the ball. If your business is struggling with making payroll, invoice factoring may be the right solution to help you bridge the gap between collecting payment and writing checks to employees. If you want to learn more, contact my friend, Blaine Waugh, at Triumph Business Capital

 

Truck Factoring

Recession-Proofing Your Business with Invoice Factoring

My first cousin, James is a long-haul trucker based out of Pennsylvania, and every time he comes through my hometown of Dallas, I meet him at a Denny’s and offer to buy him breakfast. He never says no. It’s not just because James likes his grits (and he does like his grits). James has four young kids and a wife waiting for him at home, and he could use a free meal. And me? I pretty much think truckers deserve it. After all, most American families couldn’t eat breakfast or dinner, for that matter, without the fresh goods truckers deliver each day. Yet, freight haulers don’t always know when their next load is coming in, or when they’ll get paid.

James has shared with me how stressful it is for his family when work slows down; and it may take weeks or months to pick back up again. But in the meantime, bills are coming due, and cash flow is dwindling. And, even though he may have hauled plenty of loads to pay the bills, he might not get paid for 30 days or more. Any small business owner can relate to the problem of having more month than money. That’s why I was pretty interested when I heard about invoice factoring, an alternative funding source that’s quite common in the trucking industry, but which can be used for just about any business that meets the invoice factoring company’s qualifications.

Freight brokers, independent truckers, staffing agencies, and government contractors are just a few of the business types that can benefit from this unique funding model. Here’s how it works:

What is Invoice Factoring?

Invoice factoring is the sale of your business’s accounts receivable (invoices) to an invoice factoring company. When you engage in accounts receivable financing, you receive immediate payment of approved invoices from the invoice factoring company, in exchange for a small percentage of each invoice. The factoring company then collects payment from your client.

How can Invoice Factoring help your business get through difficult times?

  • Access Working Capital from a Trusted Source

    During the recent recession, as mortgage lenders, banks and other financial institutions folded, invoice factoring survived, and even grew in strength. Because the invoice factoring industry is fueled by accounts receivable instead of loans, its foundation is stable. This type of financing has been around for hundreds of years, but it gained credibility after the recession. Triumph Business Capital is an invoice factoring company with over a decade of experience. Now that it is part of the Triumph Bancorp Group, it has the bedrock financial stability to provide its customers with even greater flexibility and capacity.

  • Pay Expenses in a Timely Manner

    With invoice factoring, you don’t have to wait for your clients to pay their bills in order to pay your vendors and employees, order equipment, and cover other business expenses. Invoice factoring companies like Triumph will pay your unpaid invoices in as little as 24 hours, so you can get the working capital you need, and get back to doing business.

  • Eliminate Collection Concerns

    When you process all your invoices with an invoice factoring company, you can end late-payment worries, and turn over the collections process to them. Triumph provides free credit checks for all your clients, and they offer both recourse and non-recourse invoice factoring for approved clients. This service ensures you will not be held liable if your customers do not pay their bills.

  • Avoid Late Fees

    If you are late paying your vendors or contractors, you may end up paying
    additional late fees and penalties. Worse yet, you may find it hard to obtain the services your business needs in the future. Invoice factoring companies only charge a small percentage of each invoice in order to provide you with immediate payment. During slow business periods or tough economic times, this may be less than the amount you might pay in late fees and penalties, if you are unable to pay your bills.

  • Get Cash Fast

    Sure, you could turn to a bank for a small business loan. But, banks charge high interest rates — and it can take weeks to get approved, if you are approved at all. With invoice factoring, approval is quick and easy. In most cases, you can get paid for your invoices in 24 hours.

  • Survive Tough Times Without Making Them Worse.

    In slow economic periods, the last thing a growing business needs is to incur more debt. Invoice factoring allows you to get the capital you need, without taking on a loan. The money is already yours — you are just getting it faster.

Financial difficulties come and go — but if you’re reading this article, chances are, you are already working to overcome your current business challenges. Next time you need a stopgap to cover upcoming expenses, you may want to consider invoice factoring. You can contact Triumph Business Capital if you’d like to learn more. And, next time you see a trucker, tell them “Thanks for breakfast.” They’ll know what you mean.

 

Factoring Company

How Invoice Factoring can Improve Cash Flow Forecasting

When I tell people that I’m self-employed and I work from home, I know what they’re thinking. “Work from home? Yeah, right. She probably spends her day scanning Facebook, taking naps and doing laundry.” That is so ridiculous. I don’t do laundry. Kidding — but it is frustrating when people don’t take you seriously just because you’re self-employed. If anything, those of us who work for ourselves are even more disciplined about setting hours, staying focused, and accomplishing our goals. After all, if we slack off and don’t complete our work for the day, we’re the ones who pay the price: not getting paid.

I work hard to meet customer deadlines, and perform work reliably — but even if I do my job perfectly, I can’t always predict when I will be paid. Many of my customers submit their jobs with P.O.s, and pay their invoices on Net 30 or Net 60 payment terms. That means that, even though I complete a job in April, I may not get paid until May or June. Add to that the fact that I don’t always know in advance what jobs are going to be coming in makes planning for the future a bit of a challenge. If you own your own business, or get paid on a contract basis, you feel my pain: while you’re waiting to get paid, your bills keep coming in. And, if you want to stay in business, you need to plan ahead.

Fortunately, I’ve discovered two powerful business tools that not only help me plan for upcoming expenses like taxes, salaries, and insurance — they can even help me get paid faster: cash flow forecasting and invoice factoring. In this article, we’ll discuss what these tools are, why they are important, and how they can help you better manage business income and expenses.

What is Cash Flow Forecasting, and why is it important?

As any business owner knows, the best-paying client isn’t always the fastest-paying client. However, waiting too long for payment can cause cash flow problems that make it difficult to pay debts, including payroll. Add unexpected expenses to the equation, and your company can quickly become insolvent.

Cash flow forecasting is method of predicting your company’s future financial position based on anticipated accounts receivable and expenses. You can use cash flow forecasting to determine your financial position at any given time — and to effectively prepare for upcoming costs.

Accurate cash flow forecasting can ensure that your business is prepared to pay its expected expenses, as well as those that may be less predictable. Some expenses — such as utility bills, insurance, and payroll, are generally the same each month. Other costs, such as unexpected repairs or a lawsuit, may take you by surprise. While cash flow forecasting can’t prepare you for every financial scenario, it can help you be better prepared for potential shortfalls.

Invoice Factoring

How Can Invoice Factoring Affect Your Credit Score?

“Sir,” I said, “I drive a paid-off Honda Accord. I pay all my bills on time. And my house will be paid off in three months. How could I be more credit-worthy?”

At 34 years old, I applied for a loan to purchase an investment property with 25% down, for a real estate business I started, and was surprised when the underwriter balked.

“You’re self-employed,” he said. “You still have a high debt-to-income ratio,” he added. “Send me your last two years’ tax returns, and your mortgage statement, and your first-born child’s Social Security Number,” he said.

Actually, he told me that I was going to need so much paperwork, he was going to have to back a truck up to my house to pick it up. In the end, I got approved for the loan — but not until I’d turned over a mountain of forms and waited many, many days.

Now, I think about building credit differently. I think before applying for loans or credit cards, and I also remember to pay bills and vendors on time. (Who knew those little late fees could result in dings on your credit report?)

I learned that credibility is currency — both figuratively and literally. For small businesses owners like me, as well as new businesses and entrepreneurs, working to improve your credit, and getting access to funds, can be a challenge. And, it pays to have more than a few tricks in your book when it comes to building credit.

One solution I recently learned about is called invoice factoring. This alternative funding source can help businesses access the funds they need fast, with minimum credit requirements, because it’s not a loan. As a result, you can get working capital without harming your credit. In fact, when you partner with a factoring company to factor your accounts receivable, you can build credibility with vendors, employers and contract workers, and improve your business’s credit rating. Here’s how it works:

  • Improve Business Credit With a Flawless Payment History

    Many businesses don’t pay their bills until they receive payment from their clients. While this approach sounds less risky, because it does not involve a loan, it can land business owners in hot water when debts go unpaid, leading to late fees, litigation, and dings on your credit report that can lower your credit score. When you partner with an invoice factoring company like Triumph Business Capital, you can receive payment for your outstanding invoices in as little as 24 hours, instead of waiting 30 days or more. This solution enables you to pay your bills on time, every time, without taking out a business loan.

  • Improve Credibility with Vendors and Contractors

    Paying bills on time doesn’t just improve your credit. It also improves your
    credibility. If you don’t pay your bills on time, vendors and contractors may stop extending credit or services to your business, in favor of clients who pay on time. At the least, clients in good standing will be given preference over your account. And at worst, vendors will eventually cease doing business with you completely. When you factor your invoices, cash flow delays will become a thing of the past, enabling you to pay vendors and creditors quickly, and improve business relationships.

  • Access Working Capital Without Affecting Your Credit Score

    Invoice factoring enables you to get cash for your business sooner, without incurring debt, or negatively impacting your credit score. In contrast, if you obtain a small business loan or other loan-based funding source, the debt will impact your credit score, as well as your debt-to-income ratio, which can make it harder to get approved for a loan.

When loans are repaid in full and on time, they can improve your credit— but if you are late on loan payments, or if you default on a loan, your credit score will drop dramatically. Invoice factoring is a sale instead of a loan, so it doesn’t affect your credit in this way. As long as your client pays their invoice, or your accounts are otherwise settled, your credit will not be affected.

 

It takes time to build successful business relationships and establish a trustworthy reputation — both of which are critical parts to any company’s growth. With invoice factoring, you can grow your business without hurting your credit. If you’d like to learn more, meet my friend, Blaine Waugh at Triumph Business Capital.

 

Factoring Invoices

5 Tips for Negotiating an Invoice Factoring Contract

The best factoring companies have your best interests in mind. Here’s how to select the right one for your business.

I was perfectly happy with my streaming Internet service until a few months ago, when a lady on the phone called and convinced me to sign a two-year contract inviting cable back into my life. It was only going to cost me a few dollars extra each month, and I would get to watch all the shows I had missed since my husband convinced me to “cut the cord.” I gleefully scanned the list of channels and awaited the arrival of the cable box. All was right with the world. Then, the bill came in. There were extra taxes, activation fees, state and federal charges. All told, I’m paying about $75 a month more than I was before. Now, I want to cancel the service — but I’ll be hit with cancellation fees if I do. Even worse? I’ll have to hear my husband say, “I told you so.” The moral of the story? It pays to read your contract.

I regularly work with growing companies that use invoice factoring to float cash flow, and I often see this common theme: Reviewing the invoice factoring contracts, and comparing invoice factoring companies, makes all the difference. I recently spoke with Steven Hausman, President of Triumph Business Capital, and he shared with me several key things to look for when reviewing your invoice factoring contract. As Mr. Hausman noted, most invoice factoring companies will already have contracts in place, meaning there may be little room for negotiation. However, by comparing contracts from several invoice factoring companies, and searching for the key items listed below, you can choose the best factoring company for your business.

Here are the top five things to look for before signing your invoice factoring contract:

1. Full Disclosure of Fees and Other Charges

From billing clients, to collecting payment, to managing payroll, factoring companies provide a number of valuable services to their clients — and reasonable service charges are to be expected. However, not all accounts receivable factoring agreements fully disclose these fees. While you generally get what you pay for, you have a right to demand transparency in all of your invoice factoring transactions. If fees are not clearly defined from the start, watch out — you may be in for an unwelcome surprise later.

2. Monthly Minimums

Be wary of invoice factoring agreements that include a minimum volume requirement per month. While it may seem simple to estimate your monthly volume today, what happens if your business changes tomorrow? What if your business experiences a slump in volume? Or, conversely, what if your business grows to the point that you have more clients who pay faster, and your factoring needs decrease? If you signed a contract with monthly minimums, you’ll have to pay minimum invoice factoring fees for each month when you don’t meet your “minimum sale volume commitment.”

3. Monthly Maximums

On that note, be sure to choose an invoice factoring company with the financial capability to support your business growth. If your invoice factoring contract includes maximum amounts that are too low to meet your future needs, you might be better off choosing an invoice factoring company with stronger financial backing. While we don’t recommend letting the size or capacity of your factoring company hold you back, we do recommend choosing a company that’s the right size, with the right resources, for your business. Bigger is not always better — but stability is essential.

4. Month-to-month Contracts and Exit Strategies

Is there an easy way to cancel your invoice factoring contract if you are not satisfied with the services provided? All invoice factoring companies are different, and beyond asking for recommendations and reading factoring company reviews, the best way to know whether an invoice factoring company is a good match may be to try it. If your factoring company doesn’t fit, you’ll probably know within the first few weeks. In order to find the right invoice factoring partner for your business, while keeping everyone fair and honest, look for factoring companies that offer month-to-month contracts. This approach lets you try out an AR financing partner for a reasonable time period, before entering a long-term contract.

5. Termination Charges

As with any contract, both parties in an invoice factoring contract are making commitments to one another. While it is reasonable and appropriate to require a term commitment, especially for larger transactions, it’s also important to ensure that any termination charges are reasonable as well. Make sure your contract spells out exactly how much you will be charged for early termination — and whether any additional conditions or penalties may apply. Less reputable factoring companies may over-charge you for early termination, or impose penalties designed to prevent you from ever leaving — just like the cable company did to me.

If you’re considering entering a contract with an invoice factoring company, be sure to read between the lines. A little extra time reviewing these five items may save a lot of headaches — and money — in the future. Oh, and one more hint from Mr. Hausman: If you’re not sure whether an item is negotiable, just ask. You might hear “no” — or you might just get a better deal!

 

If you want to explore more about invoice factoring, contact Blaine Waugh at Triumph Business Capital.