Single-Invoice Factoring: Also known as spot factoring, this type of factoring allows companies to submit invoices on an as-needed basis. Instead of signing a factoring agreement that involves a long-term commitment, you can submit only the invoice(s) you want to factor and still receive your cash advance within as little as one day.
Recourse Factoring: When we refer to recourse and non-recourse factoring, the main difference is who the liability of non-payment falls on. With recourse factoring, you are ultimately held responsible if one of your clients cannot pay the invoice you submitted to the factoring company. This means that, in the event of non-payment (and after the factor has made every effort to collect), you will need to repay the advance for that specific invoice. Because of this, recourse factoring is usually the cheaper option.
Non-Recourse Factoring: With this type of factoring, the factor accepts responsibility for the non-payment of invoices by your debtors. So, if one of your clients files for bankruptcy, for example, and cannot pay the amount they owe, the factor will accept the loss, and you won’t need to repay the advance. Therefore, non-recourse factoring has a lower risk for your business but involves higher factoring fees.
Accounts Receivable Financing in New York
Did you know accounts receivable factoring (invoice factoring) is only one of the accounts receivable financing options?
Other than factoring, there are two more options available to you as a New York business owner.
Accounts receivable financing: With this financing method, you use your invoices as collateral to secure a loan, and the ownership of the invoices, as well as the responsibility for collections, remains with your business. Unlike factoring, which is a debt-free financing option where clients make payments directly to the factoring company, accounts receivable financing involves receiving an advance from a lender that you will need to repay once your clients have settled their accounts. This advance is recorded as debt on your balance sheet.
Asset-based lending (ABL): This financing option allows companies to use their business assets, such as equipment, inventory, vehicles, property, and even invoices, as collateral for a loan. The interest rates for ABL are notably high, and defaulting will put your assets at risk.
Compared to invoice financing and asset-based lending, factoring is often considered a better choice as it eliminates debt, simplifies the collections process, and provides a more flexible funding solution for your business.
Small Business Loans in New York
If you have investigated small business loans, you have likely come across a few common options. For example, the State of New York Division of Small Business developed a comprehensive “New York State Directory of Small Business Programs” that includes a multi-page section on the available funding and tax incentives. You could attempt to get a loan or line of credit from a traditional lender, but it is becoming increasingly difficult for small businesses to get approved. If your business does manage to get approval, you will still be subject to regular repayments, the risk of losing your collateral, as well as sky-high interest.
Invoice factoring is not a loan and, therefore, doesn’t accumulate interest or require regular payments from your business. You simply receive an advance payment on work you have already completed (as much as 90% of the invoice value). When you transfer ownership of your invoices to a factoring company, instead of waiting 30, 60, or even 90 days for customers to pay you, the factoring company does the waiting, and you get the money upfront. Once your customers have paid the factor, the remaining balance will be reimbursed to you, less a small factoring fee.
New York Business Economy
New York is perfectly situated, sharing a border with Canada and providing easy access to East Coast markets through its vast railway, highway, and port networks. This bustling state embraces a diverse economy that supports a wide array of industries. You’ll find thriving sectors such as agribusiness, biotech, life sciences, clean technology, renewable energy, craft beverages, and digital game development. In addition, New York is a hub for financial services, insurance, homeland security, cybersecurity, industrial machinery, materials processing, optics, software, digital media, transportation equipment, and even television and film production, not to mention the ever-growing tourism industry.
With such a vibrant business landscape, factoring companies in NYC and across the state are eager to collaborate with New York industries and businesses. By selling your customer invoices to one of the many factoring companies ready to partner with you, you can unlock the financial potential of your business in the Empire State.
Factoring companies in New York:
Do you need a New York factoring company but don’t know where to start? Read through this Invoice Factoring Guide to learn more about invoice factoring and how to find the best factoring company in New York.
Explore industry-specific factoring companies on the Invoice Factoring Guide (IFG) website, or contact us today for help finding the best New York factoring company for your needs.