How Factoring Works
You prepare your invoices as you normally do. GCC purchases those invoices by paying you up to 90% of the invoice amount. GCC mails the invoices to your customer with instructions that they pay directly to GCC.
Once Greenfield Commercial Credit is paid on the invoices, we release to your company the reserved amount of the total invoices, i.e. the 10% or more due, minus our financing fee for advancing the cash.
The funding time for your initial factoring transaction is usually five to seven days. Once your account has been set up, cash can be advanced on your invoices and can be wire-transferred to your bank account within 24 hours of invoice date.
Factoring Terminology
Advance Rate is the amount of money provided immediately to the company factoring its accounts receivable, expressed as a percentage (usually from 75% to 90%) of the total invoice.
Discount Rate is the fee charged to the company factoring its accounts receivable.
Factor refers to the company that provides businesses with operating capital by purchasing their accounts receivable.
Reserve for Holdback is the amount of money that is not immediately provided to the company factoring its account receivable, expressed as a percentage of the total invoice amount. That is, Advance Rate + Reserve = 100% of Total Invoice Amount. This money, minus the Discount Rate, is paid to the customer once payment is received by the Factor.
Benefits of Factoring
The company gets cash now instead of waiting for payment by it's customer.
The company can take advantage of cash discounts for early payment and volume purchases
The company can offer better credit terms to its customers
To find out what information Greenfield Commercial Credit needs to get you started, just click here.
