Startup Funding Espresso--Factoring: Part 2
Hello, this is Hall T. Martin with the Startup Funding Espresso -- your daily shot of startup funding and investing. Equity funding is just one source of funding for your startup.\xa0 There are many others such as factoring. Factoring is selling your accounts receivables to a finance company at a discounted rate.\xa0\xa0 It\u2019s not a loan, so you are not taking on debt but rather selling your invoices for cash, albeit at a discount.\xa0 A typical factoring arrangement gives the business 85% of the value of the invoices and keeps 15%. The factoring company often charges a processing fee and a fee for however many days it takes the customer to pay the invoice.\xa0 These two costs add up to be the discount the business is paying for the receipt of cash.\xa0 Factoring works well for the company as it comes with long payment terms.\xa0 Businesses with a cash flow shortage often use factoring as it\u2019s a fast way to access capital without taking on debt.\xa0 The factoring company will look at the credit history of the customer paying the invoice rather than the startup providing the product.\xa0 The cost is giving up a portion of the profits which makes fast cash expensive.\xa0\xa0 Your customers will know you are factoring, as the invoice will be retitled into the name of the factoring company.\xa0 Slow-paying customers will become more expensive as the cost of collecting their payment will take longer.\xa0 Factoring works best for short-term cash flow management when you have predictable payments from customers that take some time.\xa0 Thank you for joining us for the Startup Funding Espresso where we help startups and investors connect for funding.Let\u2019s go startup something today.-----For more episodes from Investor Connect, please visit the site at: Check out our other podcasts here: For Investors check out: For Startups check out: For eGuides check out: For upcoming Events, check out For Feedback please contact info@tencapital.group