Factoring Company: Easy Application
Don’t put off working with a factoring company because you don’t want to take the time to apply. Obtaining a factoring facility is very straightforward. It’s quicker and requires less documentation than practically any other form of financing.
A traditional business loan, especially something like an SBA guaranteed loan, can take months and requires binders of paperwork. You’ll have to provide volumes of information on the business as well as its owners and officers. The underwriting process is long and extensive and may include an on-site field exam. The process will take dozens of hours of your time. You may also be required to pay the costs associated with underwriting which can run thousands of dollars.
The Application Process
The application process varies wildly between factoring companies. Some will take your information over the phone. Some will allow you to apply through their website. Some may even have a paper form that has to be completed.
Unless you enjoy filling out paperwork, look for a factoring company whose application is completely online. The process is significantly easier when you’re able to provide your information online on your schedule. No need to set up a call or dust off the fax machine.
You shouldn’t need to provide an excessive amount of documentation when applying for a factoring facility. At most you may need to provide your articles of incorporation and a copy of a driver’s license.
Be wary of a factoring company that asks for extensive documentation in the underwriting. Unless your company is especially complex or you are seeking a facility in excess of $1 million, you shouldn’t need to provide financial statements, tax returns or financial information on the guarantors. A company that asks for a lot of documentation up front may also require a lot of documentation on an ongoing basis.
Going Through Underwriting
Underwriting is a part of any type of financing. It’s how a finance company gets to know you and your business. You will likely work directly with an underwriter who will serve as your guide through the process.
In underwriting, the factoring company will review:
- The owners and officers
- The company
- The customers
This is done using a combination of proprietary databases and public information as well as information that you provide. The goal is to understand your business, which includes everything from you to your product or service to your customers.
Closing the Deal and Receiving Funds
Once underwriting is complete, you’ll be able to sign the factoring agreement which outlines all of the terms of the financing. You should find it similar to most loan documents; however, it’s typically less verbose. Factoring is a simple form of financing and doesn’t require a loan document that’s dozens of pages long.
With the factoring agreement signed, you’ll be able to submit your first invoices from which funding will soon follow.
How Long Does it Take to Apply?
The entire process is very quick. It can be less than a week from the initial application to funding. That’s weeks (and maybe months) faster than you can get a traditional business loan. A factoring company provides financing for your business quicker and easier than any bank can.
To keep the process moving quickly, respond to the factoring company’s information requests as quickly as possible. Also, once you begin submitting invoices, let your customers know to expect a call from the factor. The factor will need to send their notice of assignment and confirm that payment direction has been updated. This notice could catch your customers off guard if they aren’t expecting it.
Factoring is an Easy Way to Fund Your Business
Outside of writing a personal check to finance your business, you won’t find a quicker, easier way to get funding. The application process is quick and easy and won’t cost you more than a few minutes of your time.