Invoice Factoring

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*LCF presently limits its offerings to Sales Based Financing agreements and is in process of developing other small business funding options. By submitting this form, an applicant will be added to LCF’s waitlist for the applicable product. We may contact you now to discuss available Sales Based Financing options or refer an applicant to one of our partners presently offering this product.

Invoice Factoring

The LCF Group offers invoice factoring solutions that allows small business owners to turn unpaid invoices into cash for short-term working capital.

How Invoice Factoring Works

Invoice factoring is a financing arrangement for small businesses that involves selling unpaid invoices or outstanding invoices (or in some cases their accounts receivables) to us in exchange for a lump sum of cash. Technically, invoice factoring is not considered a loan because the business owner is not required to make any payments after they sell their invoices.

For example:

You have 100 invoices that are active and due in 30 days. For simplicity let’s assume that each invoice is for $1,000. That means your business has $100,000 in unpaid invoices or what is referred to as invoice value.

You need immediate cash, The LCF Group agrees to purchase your unpaid invoices and charges you a “factoring fee” of 5% of the value of your invoices. In this example that is $5,000 and therefore they buy the invoices for $95,000 ($100,000 minus $5,000 factor fee).

Note: Typically, the factoring company will make an upfront payment of the invoice value less a holdback amount in case invoice amounts are not paid by customers. Once the invoices are paid in full, the remainder, or holdback amount, will be paid out.

In our example, if the upfront payment is 80%, the business would get $76,000 (80%* $95,000) upfront and then remaining $19,000 is paid once the invoices have all been paid in full.

Features of Invoice Factoring:

Simple approval process: Invoice factoring eligibility does not require excellent credit, a long time in business or collateral. Invoice factoring providers focus on your total invoice amounts and types of invoices they are purchasing.
No collateral requirements: Typically, invoice factoring is considered unsecured funding so there is no risk of losing assets if there is a default.
Immediate cash flow: Selling your future invoice payments will boost cash flow immediately.

As will all business financing, there are pros and cons to each solution. Please be sure to review all documentation carefully so you are aware of the risks.