BlogWhat is Invoice Factoring? Is it for Small Businesses?
Invoice factoring means selling your outstanding invoices to a third party for immediate cash, typically an advance of 70% to 85%. It can be expensive, with some businesses foregoing 20% or more of what they're owed, and the factor collects directly from your customers, often under a long-term agreement. Cloudfloat is different: we extend payment terms to your customer, take on the risk ourselves and pay you straight away.
Cloudfloat's answer to invoice factoring
Some companies that need small business funding have a lot of their capital tied up in accounts receivables. Small Businesses can elect to release this money through a financial process known as invoice factoring.
Factoring is the process of selling your outstanding invoices to a third party in exchange for immediate cash. Typically, you’ll get anywhere from 70%–85% of an advance right away–without having to put up any collateral. Say goodbye to spending tons of time tracking down payments and asking customers where their checks are.
While factoring may be faster than some other financing options, it can be quite expensive. It’s not uncommon for companies to forego 20% or even more of the cash they’re owed in exchange for fast money. What’s more, factoring companies end up collecting payments directly from your customers—which may damage your relationship with them. Additionally, factoring companies may prevent you from doing business with customers who they deem unlikely to repay. Another thing to consider is that factoring companies often require a long-term agreement, locking you in to working with them for a large portion, or all, of your invoices.
With Cloudfloat, we do things differently. Cloudfloat takes the risk away from you core business and takes on the risk ourselves. We extend payment terms to your customer. Your Customer pays via Cloudfloat and you get paid straight away improving your cashflow. Your Customer pays us over time.
Cloudfloat does not provide a factoring service nor does it finance or factor any of your invoices. We help to get your invoices paid immediately. We provide a quick and easy way for your customers to recieve payment terms whilst you get paid now. We call it buy now pay later business finance.
Welcome to a new type of business finance. Welcome to Cloudfloat.
Common questions
Typically an advance of 70% to 85% of the invoice value right away, without putting up collateral. The trade-off is cost, since it is not uncommon for companies to forego 20% or more of the cash they are owed in exchange for fast money.
Beyond the expense, factoring companies collect payments directly from your customers, which may damage those relationships. They can also stop you dealing with customers they deem unlikely to repay, and often lock you into long term agreements covering most or all of your invoices.
Cloudfloat does not provide a factoring service and does not finance or factor invoices. It takes on the risk itself by extending payment terms to your customer, who pays Cloudfloat over time while you are paid straight away, improving your cash flow.