From the course: 43 Ideas for Starting a Side Business

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Set up a factoring service

Set up a factoring service

From the course: 43 Ideas for Starting a Side Business

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Set up a factoring service

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- A business that not many people know about is called factoring. It's sort of like loaning money, but instead of making a loan, you actually buy someone's receivables at a discount. Here's how this works. You typically find a business that has stable income, but who needs to get cashflow sooner than their customers can pay. A housekeeping service might build their commercial accounts every month, and those commercial accounts might be very consistent, but pay 30 to 45 days out. You'd pay the cleaning company 60 to 70% of the amount due, and buy the open accounts receivable. You typically charge a base fee of one to 3% for the 30 day period, and a fixed fee per invoice that you buy. The account then pays you directly. You collect the funds and then you pay the cleaning company the remainder after taking out your fees. The fees can add up to a very nice return on your cash with as much as a 50% annual return on your…

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