Funding Solutions To Unlock Unpaid Receivables

Invoice factoring involves a business selling its outstanding invoices to a factoring company. To improve cash flow, the factoring company pays the business an advance, typically 70% to 90% of the invoice value. Once the factoring company collects the full payment from the debtor, it will pay the remaining balance to the business minus a fee for the service provided.

The cost of invoice factoring can vary depending on the volume of invoices, the creditworthiness of the customers, and the industry. There are two main types of fees: discount fees and service fees. Typically, discount fees range from 1% to 5% of the invoice value. Service fees are administration fees that a factor charges for processing and managing invoices, usually ranging from .5-2.5% of the invoices factored. These fees may be structured as a flat fee or vary according to how long the invoice remains unpaid.

No, accounts receivable factoring is not a loan. It is a financial transaction where a business sells its accounts receivable (invoices) to a third party (a factoring company) at a discount. This arrangement provides immediate cash to the business but does not create debt on the company’s balance sheet.

Invoice factoring is commonly used by businesses with long invoice payment terms that quickly need cash to manage operational expenses. Industries that typically use factoring include manufacturing, wholesale, transportation, staffing agencies, and construction.

The approval process for invoice factoring can be much faster than bank loans. It often takes just a few days to complete, as the main concern for factoring companies is the creditworthiness of the invoiced customers, not the business applying for factoring.

Once approved, businesses can receive funds from invoice factoring within 24 to 48 hours of submitting their invoices. This quick access to capital is one of invoice factoring's primary advantages.

A business should consider receivables factoring when it needs immediate cash flow to cover operational costs, take advantage of growth opportunities, or stabilize its financials without taking on debt. Factoring is also beneficial when a business frequently deals with customers with lengthy payment terms or experiences rapid growth that outpaces its cash reserves.

We offer receivables funding with up to 90% advance rates. This means we can cover a significant portion of the money you are owed or inventory costs, helping you maintain and expand operations without interruption.

Unlike traditional bank loans, which often have inflexible approval processes and restrictive loan covenants enforced by regulatory laws, Paychex Funding Solutions offers a high degree of flexibility without requiring personal guarantees or detailed financial statements. Our funding decisions are based on your customers' creditworthiness, allowing us to serve businesses that might not qualify for traditional loans.

All fees are disclosed upfront before you sign any agreements. There are no hidden costs, providing transparency and trust from the start of our relationship.

Our service includes managing payment arrangements with your customers and helping ensure that all purchase orders are honored. By providing timely payments, we can help enhance your relationships with suppliers and customers.

In general, no. Factoring companies provide a legitimate service to many underserved businesses needing funds. However, not all factoring companies are created equal, and some of the more short-sighted resort to misleading customers. Paychex Funding Solutions champions transparency, accessibility, risk management, and trust in the pursuit of helping businesses access working capital.