What is Educational Provider Factoring?

Posted by Factor Funding Co. on September 18, 2012

Are you an administrator at a middle or high school system? If so, you're probably familiar with the budget crunches that affect many school districts each year. As class sizes increase and educational standards continue to rise, some school administrators have trouble meeting the needs of their classes without going into debt. Educational provider factoring can provide a short-term funding option for these teachers and administrators.

Educational Provider Factoring Overview

What is educational provider factoring? In short, it is a cash advance option for school districts that have been awarded state contracts to perform work or to increase educational offerings. When the school district receives the contract, the superintendent or the department heads can contact a factoring company and request funding to help them finish the project without the need for a bank loan.

Despite its financing connection, educational provider factoring is not a loan. This makes it easier for school districts that are on a tight budget to qualify for the arrangement. If a district has been awarded a state contract, the factor will evaluate the likelihood of the state paying the contract on time rather than the amount of cash that the school district has on hand.

How Factoring for Educational Providers Works

What's involved in the process of obtaining educational provider factoring? After a district requests factoring, the finance company looks at the size of the contract and then sends the district the majority of the contract value in a single installment. The school system can then use the funds to help pay for the expenses and materials needed to complete the contract job.

After the job is completed and the school invoices the state for payment, the state will disburse payment to the factoring company. The factor will then take the payment and apply it to the school district's account, paying off the advance. The remaining funds will be sent to the school system after the factor deducts its transaction fee.

Why Choose Educational Provider Factoring?

Educational provider factoring offers a faster way for school systems and providers to get the funds they need to complete work. Since many systems operate on an invoice period of 60 days or more, it can be several weeks before a district receives payment for a job that it has already completed. Choosing educational provider factoring helps a school district afford the supplies to complete the work without worrying about borrowing funds to pay for it.

If you're working with a local school system that's in need of additional financing, you may want to consider educational provider factoring. This arrangement offers a simple solution to pressing cash flow problems that plague many education districts.

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