What is Invoice Factoring and How Does it Work?

Factoring is a solution for small companies in industries with extended payables periods and consistent cash flow. When you need to pay the bills, or a significant unforeseen expense happens, you and your business cannot afford to wait weeks for the cash to go into your account.

By factoring with OFS, business owners can access an affordable and quick cash flow solution with best-in-class service. A client can sell their accounts receivable to OFS in return for a 90% cash infusion upfront by sending in invoices. This cash flow allows a business to take on promising opportunities that otherwise would have been outside of the carrier’s capacity at the time. Your business can take back the opportunistic initiative it takes to be successful and grow in an ever-changing industry for a nominal fee.

No longer will you be hampered by tedious collection processes and unpredictable payables periods.

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Advantages and Benefits of Invoice Factoring for Small Businesses

  • Steady and predictable cash flow
  • Low risk
  • Relieves financial constraints to help grow business
  • Advances collections process
  • Frees up time to focus on money-making tasks

Why Throttle the Growth of Your Business?

Have you ever had a time where a great new business venture is presented to you, but you cannot take it due to a lack of liquidity in your books?

Factoring is a unique and underutilized solution to a problem that many small to medium-sized enterprises face in today’s challenging markets. Many small businesses are tasked with complex collection processes that can be drawn out for weeks. Our expert collections team, led by Connie Ward, will fight for every cent of your money. Rather than spending all your time tracking down paperwork and balancing figures to keep your business running, why not let us handle that at OFS so you can keep your focus where it should be, on the growth of your business.

Invoice Factoring Arrangement Example

  1. “Jim” carries a freight load assigned by a broker or found on the load boards.
  2. Once delivery is complete, “Jim” receives an invoice for his services which will be paid in 40 days.
  3. “Jim” cannot afford to wait that long to receive payment, because bills are due next week, and “Jim” needs cash to continue operating at capacity.
  4. “Jim” sends his invoice to OFS, and within 24 hours he receives 90% of the value in his bank account. “Jim” can use this money to continue operating tomorrow rather than waiting weeks to be paid.
  5. OFS is paid on the invoice through their expert collections team, and once a typical factoring fee is charged by OFS, the remaining value goes into reserves.
  6. One day, an unexpected expense threatens the health of “Jim’s” business, but due to his reserves which have built up through factoring, “Jim” is able to cover the expense and continue operating. Since the reserves are able to be pulled at any time, “Jim” can rest easier knowing he has the money to withstand unplanned expenses.

Invoice Factoring Commonly Asked Questions (FAQs)

Many industries offer quick pay as an alternative to factoring. While both provide a solution for long payable periods, quick pay often comes at a higher quoted rate. Factoring also comes with the added service our Account Management and Credit Department teams provide. By choosing to factor with OFS, you have a more sustainable solution when compared to quick pay and an expert team of industry professionals fighting to give you the best possible returns and experience. With services such as free credit checks on new customers that can help mitigate the risk your business faces, why not choose a service personally invested in the growth and success of your business? Or continue using Quickpay with the vendors that can get a quick turnaround at a competitive rate, and use OFS when it makes financial sense.

It is essential to know the difference between recourse factoring versus non-recourse factoring if your clients do not pay their invoices.

Recourse factoring is an agreement between you and your factoring company in which you are liable to recover the outstanding invoices if the client does not pay. Though recourse factoring places the risk on the client, you will find yourself taking very few, if not none, of the risky debtors who are more prone to default due to our free credit check service. Recourse factoring is always cheaper than Non-Recourse, so in the long term, this is the best option for all parties regarding the growth of your business.

Non-recourse factoring is an agreement between you and your factoring company in which the factoring company agrees to purchase accounts receivables without “any recourse.”  In basic terms, this means that the factoring company is liable to collect all unpaid invoices without the client having to purchase them back or replace them with other invoices.

At Outsource Financial Services, we exercise recourse factoring, the most common form in the industry. Though recourse means the ultimate risk remains with the customer, it comes with the benefit of all our contract terms and fees being completely transparent. Other factoring companies advertise a low upfront rate, but the contracts have hidden fees and strict payable terms. There are no fees to start an account with us at Outsource, no minimums on how much you need to factor, and no fees for leaving.

We reserve the right to send unpaid invoices to a collections agency if, for some reason, our client cannot pay back the funds. Still, realistically, we will only push to collections when all other avenues have been exhausted.

None. At Outsource Financial Services, we do not have any hidden fees. When invoice factoring companies bury costs in the fine print of the terms and agreement, they are misleading the client and damaging their reputation. 

There are no long-term contracts and no strings attached. You have the freedom to cancel your contract with Outsource Financial Services at any time without penalty or being locked into something that no longer suits your needs. No notice is needed, and there is a same-day turnaround for clients wishing to make a switch.

You do not need to factor all of your invoices. However, once a customer has been assigned for factoring, you would need to continue factoring for that customer until you are done, we are paid off, and they have been released. To clarify, you can pick and choose which customers to send to an invoice factoring agency, such as Outsource Financial Services.

You can expect to receive funding within 24 – 48 business hours after having a phone consultation and submitting your application. You should get a call back from any serious inquiry within an hour (probably less than 5 min) if you do not reach someone the first time calling. We provide immediate attention to due diligence and underwriting and can often offer same-day application approval.

No. You can cancel your contract at any time. Invoice factoring with Outsource Financial Services is a low-risk method of improving cash flow. We absolutely do not believe in keeping a business partner one minute longer than they want. When a client parts ways, we only wish them the best in all future endeavors and hope they keep us in mind for the next time they need liquidity for their company growth.

A customer with already past due invoices might require more review, but as long as the debtor is credit-worthy, we will review any debtors at any invoice age. We also run a free credit check on any potential customer you wish to invoice. If we cannot purchase the client’s invoice, we can guide you on the following steps to hopefully get paid. Have some old invoices? Call today for a free consultation!

Debtors will send payments directly to the invoice factoring company (Outsource Financial Services).

  • Trucking
  • Import/Export
  • Manufacturing
  • Staffing
  • Medical
  • Security
  • Disaster Recovery
  • Agriculture

Our Mission

Our mission is service, honesty, and the success of your business. If you choose to work with Outsource, you will have full access to our knowledge and best-in-class service. When it comes to your business and your money, you need to trust the people handling it. Knowledge is power. At Outsource, we believe that our clients should be informed on all decisions so that they can do what is right for them and their business.