Receivable Factoring
If your accounts receivables are a huge asset to your business, you may need to use receivable factoring to acquire the money you need from it in order to sustain your business. Receivable factoring is a simple way to finance your sales as you sell your open invoices to a factoring firm who will take care of the collection process. They will provide you with 80% of the cash now so you can pay for your expenses and other things while they handle the collection of the money. Once they acquire the funds from the customers, you will be paid the other 20% minus their fees. It's a great way to acquire the cash you need now to continue running your business.
A large order will tie up your cash flow, leaving you with problems when it comes to paying your salaries, equipment, invoices, advertising expenses, and many other things. When this happens, you can significantly damage your corporate credit rating because you just don't have the funds necessary to pay for the expenses. Waiting for your customers to pay their invoices can be frustrating and time consuming, which is why it's so much easier to let someone else do it for you.
Here are some of the benefits you can expect from receivable factoring:
• You are able to acquire the money you need without giving up capital or equity to investors.
• You can pay your vendors quickly and take advantage of discounts they offer for early payments.
• You can make volume purchases from your vendors as you actually have the money to pay for it.
• You don't have to worry about calling customers and asking them to pay their invoices.
• You don't need to offer discounts to your customers that pay early or charge interest to those that just don't pay on time.
• You can finally eliminate your bad debt. Since you have cash now, put it towards your bad debt and start repairing your credit rating.
• You aren't acquiring more debt with factoring. Receivable factoring is simply getting the money you already have invoiced. You are just getting it sooner so you aren't technically getting a loan.
Like any type of financing you deal with, you do need to pay a percentage of the invoice amount to the factoring company. Their fees can be based on the size of the invoice or based on the number of invoices they take on. Make sure their fees are reasonable and affordable for your business needs.
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receivable factoring
Account receivable factoring is known as invoice sale, and is the same as selling of accounts receivables. It refers to a situation, where a company seeks financial assistance by selling their invoices to a third party, in other to get a working capital.
A businesses strongest asset is its customers. Unfortunately they are also not normally considered a liquid asset. But you can still leverage that asset if you need to. And accounts receivable factoring is a way to do. You just need to be careful using this method.
Account receivable factoring is a better option than taking loans form bank. Obtaining loan form a bank is a very tedious job.
The following article explains the whole process of the business receivable factoring and how it is helpful in providing a better business loan alternative for the fulfillment of finance requirements of a business.
An account receivable factor works on a very simple and easy give take procedure. All they do is buy the debt from the company and receive payments from the potential defaulter.
Account receivable factoring is one of the oldest forms of business financing. In fact, it is most common in certain industries such as clothing industry, where long receivables are part of the business cycle.
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