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Invoice Financing, also known as factoring, is a financial tool that offers businesses the ability to collect most of an invoice by receiving an advance on an outstanding invoice, and then paying the factoring provider a small percentage of the invoice when their customer pays the full amount of the invoice. Invoice Financing service providers typically charge a few percentage points for the service. The process of financing an invoice typically involves a good amount of paperwork; however, FINSYNC has created a 3-click method to remove all paperwork and receive a factoring decision and funding quickly.
What Is Invoice Financing?
How Does Invoice Financing Work?
The basics of invoice financing are simple: a business wants or needs cash sooner than its customer’s payment terms (net30, net45, net60, net90, etc.), so the business “sells” that invoice payment to an invoice financing company for 97% of the value of the invoice at full payment. For example, if you invoiced BigCorp, Inc., for $10,000, but their payment terms are net60, you could ‘sell’ that invoice to an invoice financing company for 97% of that invoice amount, or $9,700. You get a large portion of your payment in 1-3 business days, so you have cash immediately, and the invoice financing company earns $300 on that advance to you when your customer pays the $10,000.
Why Is Factoring So Paperwork Heavy?
The simple answer to that is that the invoice financing company is taking a lot of risk by paying your business in advance on the promise that your customer will pay their invoice on time. It doesn’t have to be that way, but invoice financing does require some back and forth. Using the example above, you would need to provide the invoice financing company with your invoice to your customer, proof that your customer has accepted and agreed to pay the invoice, and proof that you delivered the customer’s order, so that the invoice financing company can assess the risk of that transaction. Because every company’s invoicing, payable, and receivable systems are unique, each transaction is essentially manual, unless there is an existing relationship with the invoice financing company and your customer is a well-known, trustworthy customer who always pays their invoices on time.
When an individual invoice is being financed, that transaction is unique, and the invoice financing company is offering the business an advance payment for that one invoice. Paperwork, time, and human interaction are required.
Paperwork Heavy, Until Now
FINSYNC customers enjoy a very simple process for invoice financing. Drag and drop your invoice onto the payment request screen, and click “Collect”. That’s it. Your financial institution now has everything they need to make a decision on financing that invoice. The very short video below demonstrates the entire process in just a few seconds.