What Is A Business Factoring Loan?

By: First Union | Date:

business-financeresources

What Is A Business Factoring Loan?

Different from a typical loan, a business factoring loan is the sale of assets to a financial institution, or what is known as a factor. Essentially, your company is taking its accounts receivable and invoices and selling those to a lender. The rationale behind such a premise is this: let’s say your firm needs cash now, whether for purchasing new equipment, keeping a positive cash flow or dealing with day-to-day operations. The problem is that these outstanding invoices are coming in more slowly than anticipated (and this can happen, especially in specific industries/). With a factoring loan, you now can get the funds you need from those accounts by selling the debt and thus acquire the working capital necessary in a far more timely manner.

A Couple of Key Things to Know About Business Factoring Loans:

The factor, or financial company purchasing the invoices, will want to know about your customer’s payment history. After all, they will be collecting the money owed directly from that client, so having customers with a solid record of payment is critical.

When purchasing the accounts receivable, the factor generally gets a discount on the total percentage owed. This can be anywhere from 2-7%. So this is not something that you want to do to get cash quickly continuously, but for a short-term solution, it is worth considering. You will generally receive about 75% of the amount up front, and then once the factor successfully collects on the invoice, your company gets the balance.

At First Union, we would be interested in discussing a potential factoring loan with you. We have designed our flexible financial products with small businesses in mind; you don’t have to struggle—there are economic solutions out there that can help. Call today!

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First Union Lending LLC is a dually licensed Lender/Broker with its main offices located at 4900 Millenia Blvd First Floor Orlando, FL 32839. First Union Lending LLC and its ads are meant for continental United States, including Alaska and Hawaii small business owners. Business Loans offered by First Union Lending LLC have varying rates and terms that can range from 30 - 120 payments and all rates and terms are based on eligibility of the business and its owners. The actual terms are based on credit, business history, industry, amount and terms. As an example, a $5,000 loan paid over 5 years at 8% would have a total repayment of $6,082.92 over the life of the loan. We use the latest encryption to protect sensitive information transmitted online, as well as run our own secure server network to ensure your information is protected offline as well.

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