Sometimes, waiting even just a few days for a customer’s check can impair your company’s ability to secure premium purchasing rates from your own vendors.

That’s the principle behind invoice factoring for small businesses, a trend that’s on the upswing.

Small business is the heart and soul of our economy. More than 99% of U.S. employers — 25.8 million — are small businesses.

With today’s economy, payments are running later than ever. This can greatly harm a company’s ability to take on new customers, and even to secure the most competitive rates from its own suppliers. It also makes it more difficult for these businesses to pay their suppliers on time.

Accounts receivable factoring attempts to build a bridge over this gap for small business financing. The factoring firm provides what is essentially a short-term loan.

When the company’s billing period ends, it re-pays the factor.

There are three steps most accounts receivable will do before initiating a business relationship with a new customer:

• Accept only one invoice for the first transaction, while the factor does due diligence
• Check the credit of the debtor listed on the invoice, and
• Confirm that the sale actually occurred.

Tags: accounts receivable, customer, factor, invoice, vendor