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What Is Accounts Receivable Factoring?
Accounts Receivable Factoring is sometimes called “Invoice Factoring.” It refers to the process of when a business sells unpaid invoices to an accounts receivable factoring company or a “Factor” for a discount rate. The factoring company assumes responsibility for collecting the payment from your customer. Once the factoring company collects from the client, they pay the small business owner the remainder of the invoice amount, minus factoring fees.
Invoice factoring loans are a solution for small business owners who experience a long lapse between when a service is rendered and when the invoice is paid. This type of financial transaction allows the business owner to receive payment on their accounts receivables sooner.
MAX FUNDING AMOUNT
$10K - $10M
FACTOR RATES
Starting at 1% p/mo
TERM
Up to 24 months
SPEED
1-2 Weeks
ANNUAL REVENUE
$250K +
Who Qualifies For Invoice/Receivables Financing?
CREDIT SCORE
550 +
TIME IN BUSINESS
1 YR +
How To Apply For Accounts Receivable Factoring:
At ECL, we can work out arrangements with many factoring companies for as much as $10 million of receivables, with factor rates starting at 5.8%. The funding process usually takes up to two weeks. Here’s how to apply:
Step 1: Make Sure Your Customer is Reliable
An essential requirement for factoring companies in factoring invoices is the reliability of your customer. Before contacting a factoring company, you must be 100% certain that your customer will pay their invoices within a reasonable time frame.
Step 2: Gather Your Documents
To apply, the finance company will need the following documents and information to see if factoring invoices is appropriate:
-Driver’s license
-Voided business check
-Bank statements from the past three months
-Business tax returns
-Account Receivable Aging report, Accounts Payable report, debt schedule
Step 3: Fill Out the Application
You can begin the application process by giving us a call or filling out our one-page online application. Either way, you’ll be asked to enter the information from the previous section and the value of the invoice amount you wish to sell.
Step 4: Speak to a Representative
Once you apply, a representative will contact you to explain the factoring fee, factor rate, and terms attached to the sale. This way, you won’t have to worry about any hidden fees during each payment.
Step 5: Receive Approval
The entire process takes about 2 weeks, and once the transaction is approved, funds should appear in your bank account in 1-2 business days after completion.