What is Factoring?

By selling your invoices to a financial company known as a “factor,” you can receive cash on hand while they collect payment on those invoices.

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Factoring is also known as accounts receivable financing. This process allows you to receive funds from your invoice within 24-hours.

Invoice factoring empowers you to gain the cash flow you need to continue your everyday operations instead of waiting weeks or even months for your customers to pay you.

How Does Factoring Work?

Factoring is a financial transaction whereby your company sells its accounts receivables in exchange for immediate liquidity. With factoring, we will fund your outstanding invoices so that you have the cash flow to pay operating costs, salaries, materials, and other expenses. Summar understands that your customers’ payment schedules—although reasonable—may cause undue strain on your day-to-day operations. So, we give you the power to get the invoice paid, maintain good relationships with your customers, and keep your business cash flow high all without incurring debt or having to include liabilities on your balance sheet.

The service initiates when a factoring company buys invoices by paying cash, and holds the invoices for collection until these become due. As soon as a company completes a service or delivers the merchandise to his/her customer, the invoice is sent to the factoring company for funding.

The factoring company will then provide an advance payment of 70% to 90% of the face value of the invoice, via wire transfer to the client’s bank account.

Once full payment is received from our clients’ customer (debtor), the factoring company returns the invoice payment balance minus the factoring fees to your company.

You can be sure that your customer service representative at Summar is also a knowledgeable factoring professional and will explain to you in detail the accounting side of the factoring transactions in your books. So that you can keep a precise track of all your fund movements, your company will receive the below-listed reports for each transaction:

Statement of Accounts Receivables (Aging).

Debtor Reports

Collections Reports

Reserves Reports

Invoice factoring can benefit any organization that’s currently growing faster than its working capital.

With Summar on your side, you have a financial partner that can act as your entire accounts receivable department. The result is enhanced business relationships.