invoice factoring
& financing
Invoice Factoring & Financing
Factoring is a financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital.
Invoice Factoring with Orumfy lets you obtain the working capital from your outstanding invoices.
6+ months in business $50,000+ in annual revenue
with section 179 “business vehicle deductions”
Overview
Overview
Invoice Factoring is a financing method in which a business owner sells accounts receivables at a discount to a third-party funding source to raise working capital.
Invoice Factoring is an important aspect for any business, that invoices their clients and either needs working capital to grow their cash flow or wants to remain focused on its main business activities rather than spending its energies in the collection of payments from its debtors.
Advance invoice factoring and maturity invoice factoring are two types of factoring services which the business may choose from depending on its suitability.
If the business faces a cash flow crunch or needs money for the invoices immediately for other reasons then it may opt for advance invoice factoring, in order to obtain the working capital required.
If there is no immediate requirement of cash then the business may opt for maturity invoice factoring.
At Orumfy we specialize in Advance Invoice Factoring as a financial solution for small businesses that need help with their short-term cash flow issues or are looking to obtain working capital for growth.
This is an effective option, especially if your business does not qualify for traditional bank loans or other alternative financial products.
This is an effective option, especially if your business does not qualify for traditional bank loans or other alternative financial products.
Our specialists at Orumfy can factor your customers’ invoices to match your working capital needs and help you get the money you require to become a stable and independent enterprise.
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Maximum Loan Amount Approx. 50 to 90% of the total invoice amount. -
Term When customer pays the invoice, you receive the remaining 10-50% reserve amount, minus the fees. -
Factor Fee Approx. 3% + %/wk outstanding -
Speed As little as 1 day
Types of Invoice Factoring and Financing
| Advance Invoice Factoring vs Maturing Invoice Factoring | Non-Recourse Invoice Factoring vs Recourse Invoice Factoring | Reverse Invoice Factoring or Suppliers Guarantee Factoring | ||
|---|---|---|---|---|
| Under advance invoice factoring arrangement, money is paid by Orumfy to the business in advance. However, not the entire amount is paid in advance, but only a certain percentage of the receivables. The balance amount is paid on the guaranteed payment date. The held back amount is the margin ranging from 5% to 15% which is paid post realization of money | Maturity invoice factoring, also known as collection factoring is a type of invoice factoring service in which the client sells his invoice to the Orumfy and in return, Orumfy pays the client for such invoices either on the date of maturity or any other date after the date of maturity. For example, an invoice maturing on 25th August, 2018 shall be either paid off 25th august 2018 or any other date after maturity decided between the client and the factor. | Under this type of invoice factoring, unlike recourse invoice factoring, Orumfy assumes the risk of customer credit. In a case of default by the customer, the business is not liable to pay anything. | Recourse invoice factoring means the credit risk of the customers of the business is assumed by the business only and not by Orumfy. | Reverse invoice factoring is when a lender interposes itself between a company and its suppliers and commits to pay the company’s invoices to the suppliers at an accelerated rate in exchange for a discount. This is a lower-cost form of financing that accelerated accounts receivable receipts for suppliers. |
| Orumfy collects the agreed rate of interest for advance payment made to the business considering the short term rate, turnover, cash flow, and financial standing of the business, etc. | In the factoring arrangement, Orumfy does not pay the client any money in advance. | Not all failures to pay will be covered by non-recourse arrangement and those that are will be specified in detail. For example, it’s unlikely you’d be protected if a customer disputes the value of the invoice. | In this type of invoice factoring Orumfy is only a financing and collecting agent for the business. | Reverse invoice factoring allows suppliers to receive discounted payments of invoices which are due to be paid by a buyer. |
| For example, an invoice maturing on 25th August, 2018 shall be either paid off 25th August 2018 or any other date after maturity decided between the client and the factor. | Commission charges would have been higher if factor would also have assumed the credit risk. Here, the charges would only include a component of interest on the money advanced and service charge for collecting the money. | |||
| Orumfy takes over all credit and collection functions. It’s a good option for those who want increase their cash flow and remain focused on its main business activities rather than spending its energies in the collection of payments from its debtors. | ||||
| Disclosed Invoice Factoring vs Invoice Discounting | Full Invoice Factoring vs Spot Factoring | |||
| Disclosed invoice Factoring means the customer of the business is aware of the factoring arraignment of the business. | Similar to invoice factoring, in this process the invoice discounter advances an agreed percentage of the invoice value, 80-90 percent of the total amount. | Full Invoice Factoring buys all of your (credit worthy) receivables. | Allows you to sell just one invoice to the factor. | |
| Under a disclosed invoice factoring arrangement Orumfy also takes over responsibility for running your credit control process. We pursue the debtor for payment, issuing statements and performing all the usual credit control actions. | Unlike invoice factoring, invoice discounting does not allow the customer to know of the arrangement and the supplier is in charge of all the sales ledger administration. | |||
| Because the customer is unaware of the discounting process you have commenced, it gives you a chance to maintain your relationship with the client. The funding limit for invoice discounting is limited only to your credit limit, which grows with the growth of your business and its cash flow. | ||||
*While some companies using a factor for the first time may think they’d prefer to factor on a non-notification basis, many find that it is not really necessary as most of their customers already are familiar with the practice and don’t care whether their invoices are factored or not.
*DOMESTIC AND CROSS BORDER FACTORINGFactor giving the services of purchase, management, funding and collection of accounts receivable in domestic territory is termed as domestic factoring. Here three parties are involved i.e. buyer, seller, and factor who are located in the same country. Whereas, if the same services are provided in international markets then it is termed as cross-border factoring. Here four parties are involved i.e. exporter, importer, export factor and import factor.
Businesses That Typically Use Invoice Factoring.
With invoice factoring, Orumfy places the emphasis on the quality of the factoring client’s invoicing documents. Businesses that use these services need to have business-to-business sales. Generally, invoice factoring clients offer payment terms between 30 to 90 days, although they may vary according to different industries. This process also entails the company to sell the products on a “final sale” basis instead of guaranteed, consignment, or contingent sales.
This service is usually availed by:
- Temporary staffing companies.
- Transportation companies.
- Manufacturing companies.
- Commercial janitorial companies.
- Security guard companies.
- Construction companies.
- Landscaping companies.
- Distribution companies.
- Oil and gas companies.
Businesses That Typically Use Invoice Factoring.
With invoice factoring, Orumfy places the emphasis on the quality of the factoring client’s invoicing documents. Businesses that use these services need to have business-to-business sales. Generally, invoice factoring clients offer payment terms between 30 to 90 days, although they may vary according to different industries. This process also entails the company to sell the products on a “final sale” basis instead of guaranteed, consignment, or contingent sales.
This service is usually availed by:
- Temporary staffing companies.
- Transportation companies.
- Manufacturing companies.
- Commercial janitorial companies.
- Security guard companies.
- Construction companies.
- Landscaping companies.
- Distribution companies.
- Oil and gas companies.
How it can help your business?
Compare to other small business loans Orumfy offers:
Things to Consider
How do you qualify for a Invoice Factoring/Financing ?
How does it work?
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Step 1
Complete the application process and provide the necessary documents
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Step 2
Once approved, contract is signed
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Step 3
As soon as you submit the invoice and the invoice is verified, the first installment - the advance, is deposited to your bank account
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Step 4
The second installment, the rebate, is deposited to your account once your client pays the invoice in full on their regular terms. The rebate settles the transaction.
How does it work?
Cost and Terms
- Invoice Factoring rates range from 1.5% to 3.5% per month.
- The rate is based on the line size and the credit quality of the company paying the invoice.
- Larger transactions with reliable account debtors usually qualify for better terms: lower costs and higher advances.
The important thing to understand is that your funding amount will be based on the creditworthiness of your business’s customers, and not your business’s cash flow performance.
Best Industries for
Small Business Loans
Industries Orumfy has helped to obtain Small Business Loans
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- or contact us here.
