A typical factoring contract will outline all the terms of your arrangement in great detail and will include the fee structure, charges and commissions, contract length, the advance rate, credit limits imposed, minimum and maximum invoice terms, any collateral requirements, grant of security interest, details of when statements will be sent, details on how to deal with disputes and claims, indemnities and termination clauses and defaults. As with all contracts, you must thoroughly read and make sure you understand your factoring agreement before you sign. . In exchange for a small fee, a factoring broker or company will advance an average of 80% of the value of an outstanding customer invoice to a business and pay the remainder once the customer has paid the bill. This is a common practice for small and medium-sized companies to generate cash flow without resorting to bank loans.
An additional question: Respond to this Question
- How can factoring help my business improve cash flow?
- What are the requirements for factoring?
- Can I pick and choose which invoices are factored?
- How does a factor determine which invoices to accept?
- What's the difference between factoring and invoice discounting?
- How much cash will I get up front for my invoices?
- What is reverse factoring?
- What are the different types of factoring?