What is Factoring?
On the surface, Interstate Billing Service's non-recourse accounts receivable management program may seem very similar to traditional factoring.
Like A/R management companies, factoring services advance funds within a very short period of time (usually 24 hours or so) based on your customers' invoices. This quick turnaround gives you ready access to funds, increasing your company's cash flow.
The difference is in the details.
With factoring, your customers' invoices are pledged as collateral, not purchased outright. This means that it's still your responsibility to evaluate customer credit, send statements and manage collections. These services are all typically included with an A/R management service.
Because your invoices are not purchased by the factoring company, only a portion of the invoice amount is advanced to you when you submit your invoice. The remainder (less a variable fee) is released to you when you collect from the customer.
With A/R financing, you receive the full amount of your invoice, less a pre-negotiated flat discount fee, when it's submitted.
The biggest difference between factoring and the non-recourse billing program offered by IBS involves credit risk. With factoring, you retain all of the liability and responsibility of collecting invoices, which comes with the risk of bad debt that could have a negative impact on your business. With IBS, we assume the credit risk on all approved accounts, removing that uncertainty.
The IBS team can help you evaluate your company's particular needs to see which type of service is right for you. Request a call today to learn more.