Factoring has been around for a long time, but many people are still unsure about its legality. We are often asked at JOBE Services, Inc., “Is factoring legal?” We are happy to answer this question with facts and dispel any false notions.
What is Factoring?
Factoring is the process of selling accounts receivable or outstanding invoices to a third-party company at a discounted rate in exchange for immediate cash. This allows businesses to improve their cash flow and avoid the long wait times associated with traditional invoice payment terms. But is factoring legal?
The answer is yes, factoring is totally legal. In fact, it is a common and widely accepted practice in the business world. No laws or regulations prohibit businesses from selling their accounts receivable to a factoring company.
Factoring Is a Valuable Financial Tool
In addition to being legal, factoring can be a valuable tool for businesses that need to improve their cash flow. Factoring allows companies to get immediate cash for their outstanding invoices, which can be used to pay bills, make payroll or invest in growth opportunities.
- Factoring is not a loan.
- Factoring is not a scam.
- Factoring does not require a credit check.
- Factoring does not harm your credit.
- Factoring can be used sparingly when needed or routinely as part of a company’s accounts receivables.
Overall, factoring is a legal and valuable practice for businesses. However, businesses must do their due diligence and choose a reputable factoring company that complies with all applicable regulations. With the right factoring company, businesses can improve their cash flow and achieve their financial goals.
Choose a Reputable Factoring Company like JOBE Services, Inc.
Businesses must choose a reputable factoring company like JOBE Services, Inc. that complies with all applicable regulations. We have a clear and transparent fee structure and do not engage in any deceptive or unfair practices. Moreover, we scrupulously follow all state and federal regulations that govern the factoring industry.
Factoring companies must comply with state and federal regulations, including the Fair Debt Collection Practices Act (FDCPA) and the Uniform Commercial Code (UCC). The FDCPA prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debts. The UCC governs commercial transactions, including the sale of accounts receivable.
Unscrupulous companies have given factoring a lousy name. Beware of companies offering factoring services but participating in shady practices like:
- Charging high or hidden fees
- Limiting the amount of funding you can access
- Demanding long-term contracts
- Limiting access to your funding account
Small and medium-sized businesses all over Texas choose JOBE Services, Inc. for our integrity and reliability. We are locally based in Humble, TX, and serve companies far and wide. We also offer non-recourse factoring, the safest and best factoring method for our clients. Call or message us online today to learn more or to begin using factoring to maintain the cash flow in your business.