How to Sell Accounts Receivable to Fund Working Capital
Business owners with accounts receivable may sell the accounts to a factoring company for upfront cash. Factoring companies typically buy the invoices for a percentage of the face value. The exact percentage varies, but is typically around 80 percent. The factoring company collects the accounts receivable invoices on your behalf, and funds received for factoring are not considered a loan and your business does not create debt by factoring.
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Instructions
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Select a factoring company. Consider an International Factoring Association member. Factoring companies that belong to the IFA organization are held by a code of ethics that requires member companies to abide by federal and state laws; use accurate accounting procedures; maintain truth in advertising and avoid conflicts of interest.
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Apply for factoring. Once you select a company that fits your needs, you must submit an application. Purchase approvals depend less on your company credit and more on the collection risk of your accounts.
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Review the purchase offer. Make sure the factoring company works with accounts receivable from your industry and understand the amount you'll get up front for your accounts. Hire the company that best fits your funding needs.
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