If you do things correctly, you can get your first round of funding within a few days, and subsequent financial transactions can often be completed within a business day. Note that his varies based on circumstances.
However, you need to do a few things to make sure that you get funded quickly.
Most factoring companies divide the financing process into two parts. The first part, often called the “first funding,” is your very first transaction with the factoring company once the contract is executed. This part of the financing process can be the most challenging for you because you need to prepare for it beforehand, while the factoring company is finishing their due diligence and you are reviewing the contracts. Both you and the factor need to manage the process so that it flows smoothly; otherwise, you could encounter delays.
The second part of the financing process is the ongoing relationship that is established, in which you regularly submit invoices for funding to accelerate your revenues. Both parts of the process are important, and doing things correctly helps you get funded quickly.
You can find detailed information about the factoring process by reading “How does invoice factoring work?”
What slows down your first funding?
The best way to speed up your first funding is to submit a complete application package that includes everything that the invoice factoring company requests. The most common source of delays, by far, is incomplete applications. If the factor has to ask for missing information, the underwriting process stops.
Another source of delays is related to the client notification process. Factors need to send a notice of assignment to your customers, informing them of the new payment address and other important information. Most of these notifications require client acknowledgement before the factor can start buying your invoices. Although the speed at which your client acknowledges the notice of assignment is outside of your direct control, you can often get a faster response by informing your client about the factoring relationship beforehand.
What slows down daily/periodic fundings?
After their first funding, most companies sell invoices to their factoring companies on a weekly, or even daily, basis. This arrangement provides your company with the main benefit of this program: regular cash flow.
Most of these transactions can be funded within a business day, provided that your customer has been set up with the factor, that you comply with your factor’s invoice submission guidelines, and that your client is willing to verify their invoices quickly. This last point is critical. Factors verify invoices before purchasing them. The verification process is often handled through a quick phone call or e-mail. However, the advance of funds could be delayed if your client is slow to verify.
The best way to minimize the chances of slow verification is to enlist the help of customers. Have an open discussion with your customers and explain why invoice factoring is important not only for your company but for their companies as well — because it allows you to offer them payment terms.
Want more information?
We can provide you with a competitive factoring quote – high advances at low rates. For information, please call (877) 300 3258.