Learn More About Factoring
If you are a business owner seeking a financial solution to fund a commercial property project, you may want to consider factoring loans offered by commercial mortgage companies. Factoring loans are an excellent alternative for those who find it difficult to obtain traditional loans, offering numerous benefits that make the process of securing a commercial mortgage simpler and faster. In this article, we will discuss the ins and outs of factoring loans, from what they are to the eligibility criteria, and more.
What Is Factoring?
Factoring is a financial process that involves a business selling its accounts receivable to a third-party (the factor) at a discounted rate, freeing up cash flow for the business. In the context of commercial mortgages, factoring loans work similarly. Instead of selling accounts receivable, businesses can sell their business debts or invoices to the factor for a percentage of their value, usually between 70% and 90%. This type of financing is a viable option for businesses that face cash flow problems, lack sufficient collateral, or have limited or poor credit history.
How Does Factoring Work for Commercial Mortgages?
When applying for commercial mortgages through factoring loans, businesses can access cash from unpaid invoices that have an agreed repayment date. The factor handles the collection of repayment, taking off some percentage as interest, while the business keeps the cash flow needed for its operations. Factoring loans thus provide businesses with the necessary funds they require to undertake their commercial property projects, without the need for them to bear the burden of repayment.
What is the Eligibility Criteria for Factoring?
To qualify for commercial mortgages through factoring loans, businesses must meet specific requirements. Typically, factors consider the credit standing of their clients, their financial statements, and the accounts receivable to be factored. Most investors do not factor debts for first-time customers who lack a financial history. Yet, we hold an open-door policy for all clients and consider a wide range of eligibility criteria that include none or no credit history but steady cash flows from recent sales.
What Types of Commercial Properties Can Be Financed Through Factoring Loans?
Factoring loans can fund a variety of commercial properties, including retail spaces, industrial complexes, and office buildings, among others. Eligible properties must be income-generating, as this indicates that they have financial potential for generating steady returns for both the business and the investors.
What Documents and Information Are Required?
When applying for commercial mortgages through factoring loans, businesses need to provide documentation that supports the factoring process. The documentation may include invoices from your business debts, financial standing, and credit history. We understand the importance of minimizing the documentation and have reverse-engineered our loan application process to make it swift and efficient.
Are There Any Restrictions on How the Funds Can Be Used?
Unlike traditional bank loans, factoring loans come with no limitations on how businesses can use the funds, giving them the flexibility to direct the capital towards a variety of ongoing or prospective projects. Whether you need to expand your business operations, purchase new real estate, or reinvest in your current property, factoring loans may be the perfect financing solution for you.
