What is factoring, and how can it save your business?

If you've already thought about working with a factoring company for your business but you're still not sure how it works, this article is for you. If you don't know what factoring is but you're looking for a new way to get cash fast and without red tape, this article is for you.

What is factoring?

Factoring is a financial service, not a loan. That's important to remember if you're skeptical or if you're under the impression that getting money for your business has to be a complicated process full of obstacles.

With factoring, a non-bank financial institution accredited and regulated by the National Bank of Romania buys the invoices you've issued to your customers that are still within their payment term. The steps you need to take are clear and involve no red tape. How?

1. Create your account on instantfactoring.com
2. Upload a copy of the invoice you want to finance
3. The Instant Factoring team checks the details and gets back to you within 2 hours
4. If everything is in order, you'll get the money within 24 hours.

What do you need to do?

Make sure the invoice is still within its payment term and that you have a customer who pays invoices on time. We'll take care of the rest.

To make things clearer:

Let's say you've issued a 200 € invoice to your customer. The invoice is still within its payment term, but you need cash fast for your business's day-to-day expenses. You remember factoring and want to give it a try. You follow the steps above and receive 190 € in your account within a day. The 10 € difference is the factoring company's fee.

Advantages and disadvantages of factoring

Advantages:

• You get quick access to cash. You no longer have to wait to collect your invoices. You can finance them with Instant Factoring and get the money in your account within 24 hours.
• You save time. The process is 100% online and involves no red tape, which lets you focus on the things that really matter for your business.
• You can grow your business quickly. Steady cash flow from invoice financing lets you put your growth plans into action without waiting to collect each invoice one by one.
• You take uncertainty out of the equation. When a crisis hits, access to cash is essential. In today's economic uncertainty, steady cash flow in your company can save your business.

Disadvantages:

• You can only get financing for the value of the invoice you issued to your customer. When you use factoring, the financed amount is strictly tied to the value of the invoice you issued to your customer. At first glance, that may seem like it won't give you extra funds for investment. In practice, all you need is reliable customers who pay their invoices on time to secure steady cash flow over the long term.
• Your customer will be contacted by the factoring company. If you decide to finance your invoices through factoring, it's good to know that we'll contact your customer to verify the details and share the new bank account they need to use to transfer the money for the services you provided. Even so, it's important to remember that our involvement isn't intrusive and won't affect your relationship with your customer in any way.

What fee do you pay for invoice financing?

As you saw in the example above, Instant Factoring charges a fee for financing your invoices.

The fee is always calculated based on the time left until the due date of the invoice you want to finance. The average fee is 0.10% per day. In most cases, you'll pay a fee of 1.5% of the invoice value for 15 days left until the due date, or 3% for 30 days left until the due date.

If you need help figuring out how much you'll receive in your specific case, you can use our calculator here.

Reading this article is already the first step toward growing your business. At Instant Factoring, we've supported many entrepreneurs, we know the challenges they face, and we're ready to give you the support you need.

If you need a long-term partner, we're here. Contact us. You'll be surprised by how quickly we reply.