Using Invoice Factoring to Grow Your Business

| Posted: 28-07-2007 | Comments: 0 | Views: 7 | Rating: (50)

(?)

Invoice factoring can be utilized when you've refused a job or an order because your business didn't have enough capital to purchase the supplies or hire the extra staff. You build a good reputation, have good workers and then when you finally get a nice big contract, you have to turn it down because all your money is tied up in accounts receivables. You know the bills will be paid, but they aren't due quite yet so you are the one who suffers because of cash flow problems.

If you have customers who are established, are good credit risks and almost always pay on time, you can sell those invoices to an investor (a factor). Factoring will give you an advance of 70% to 90% when the invoice is issued and will wait for the bill to be paid. Then you will get the rest of the money minus a small fee of 2% to 4% per month. The advance and fee depend on monthly volume, size of invoice, credit, time it takes to be paid and other variables.

Some business people are under the impression that the advance of 70% to 90% is all they get. They are thrilled when they discover they get the rest when the bill is paid except for the small fee. So they actually get 96% to 98% of their invoice.

Factoring isn't a loan, nor is it a credit line. There are no debts to pay back and you don't have to tie up any assets other than the customer's invoices. It only takes a few days to get approved and you keep complete control of your company.

Almost any business can use factoring, as long as they have invoices that are issued to another business. Even a business in Chapter 11 can have their receivables factored. Different factors have different requirements, minimums, maximums, fees, rates and applications to fill out. Some have a small application fee, many do not.

There are factors who work with any industry except construction and medical. There are others who specialize in construction contractors and others in medical receivables. These two have specific rules and regulations and risks and you definitely want a factor who specializes in them.

A good broker will be working with several factors and should be able to find the best factoring company for you. The broker will work for you, will get your questions answered and will be able to go to a second factor if the first one doesn't fit your needs. The broker gets paid directly by the factor and your rates and fees are not affected.

Quite often business people think of using factoring as a last resort when their business is struggling and they are trying to survive. In reality, businesses should consider a factor when they are starting out, so they can keep their business growing. They should definitely use a factor when they are feeling confident about their business and are ready for growth.

Your customers will simply have a different address to send the payment to; they still do the work for you, get the invoice from you and have the same payment terms as they always do.

Just think how your business could grow if you were paid most of each invoice when you issue it: you could get discounts when you buy your supplies if you pay cash, you could do more marketing, hire more staff, buy more equipment, increase your own credit rating. Instead of focusing on collecting the payments you could concentrate on going after more contracts.

The next time a customer calls you with a big contract, you just have to get the papers signed and get on with the work. Sounds good, doesn't it?

Rate this Article:

Current: 0 / 5 stars - 0 vote(s).

Article Tags: Working Capital, Cash Flow, Invoice Factoring, Accounts Receivable Factoring, Receivables Funding

Article Source: http://www.articlesbase.com/non-fiction-articles/using-invoice-factoring-to-grow-your-business-189522.html

Print article

Send to friend

Publish this Article

Author feedback

About the Author:

Kent Harlan has been a CPA since 1984 and is the owner of Ozarks Capital Funding, a firm offering financing in the areas of accounts receivable factoring, equipment leasing, and financing for healthcare providers. http://ocflink.comkenth@ocflink.com

Submitting articles has become one of the most popular means of generating quality backlinks and targeted traffic to your website. Join us today - It's Free!

Article Comments

Add new Comment

Invoicing Methods and Factoring
By: Kent Harlan | 24/07/2007 | Non-Fiction

Overcoming the Myths of Receivables Factoring
By: Kent Harlan | 25/07/2007 | Non-Fiction

Accounts Receivable Factoring- An Alternative to Bank Financing
By: Kent Harlan | 24/07/2007 | Non-Fiction

Why Freight Bill Factoring is Necessary in the Transportation Industry
By: Kent Harlan | 24/07/2007 | Non-Fiction

How Invoice Discounting Helps Your Business' Cash Flow
By: James Croydon | 15/02/2006 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

The Importance of Cash Flow to Businesses
By: Amelie Mag | 05/12/2006 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Accounts Receivable Financing- the Fine Art of Happiness
By: Gregg Elberg | 14/03/2007 | Finance
Free Finance articles for use on your Finance related website. Find articles of the subject of Finance

Banks Pushing Out Commercial Clients: Great for the Factoring Industry
By: Howard R Hill | 27/09/2008 | Loans

Got a Question? Ask.

Ask the community a question about this article:

Frequently Asked Questions

What does negetive working capital implies?
By: Sivjis2000 | 06-04-2008
What does negetive working capital implies?

Factoring Leads?
By: Joshc | 28-09-2007
Do you know where to buy factoring sales leads?

Q&A Powered by:

Latest Non-Fiction Articles

Book Marketing: the Day That is Different for Your Career Strategy
By: Rosey Dow | 06/10/2008
Make an informed decision about the direction of your writing career--print or online, or both.

In the Lap of the Gods 22
By: Steve Morgan | 05/10/2008
For those who have read the other 21 chapters

A Week in the Life of the Single Working Mother
By: Karen Dosw | 03/10/2008
A humorous article about a week in the life of one South African, single mom with two adult children and two little ones.

Why You Should Write for Free
By: Deborah Owen | 01/10/2008
Write for free? I can hear you saying, “Are you nuts?” Write for free, so you can get paid. Read more inside.

Why You Should Write for Free
By: Deborah Owen | 01/10/2008
You asked if they had a job opening. They said no. They told me “no”, too, but I got the job anyway. Read more inside.

Becoming a Reporter is Easy
By: Deborah Owen | 01/10/2008
Do you want to be a reporter? It’s a great way to break into print, and the jobs aren’t that hard to get. Read this article to learn more.

Writing it Down
By: Galina Nemirovsky | 29/09/2008
Lately I’ve developed a compulsion to write everything down. Stringing words together and composing sentences in the shower, I want to write it all down – remember it – capture it. I stare at people in the subway and craft their character descriptions in my head...

The Modern Lily Tomlin
By: Galina Nemirovsky | 29/09/2008
I’m waiting in a conference room that smells like the corner of career aspiration and stale office carpet. The overly heavy and overly bitter receptionist has a voice that is piercing through the makeshift conference room with walls that only go up about 7 feet. Like an annoying hiccup, she keeps repeating “Good morning, Hudson. Your name? Hold please.” Over and over again. She is an extra large version of what the rest of the world has automated already.

More from Kent Harlan

Making the Right Choices for Financing Your Medical Equipment
By: Kent Harlan | 07/08/2007 | Finance
Getting the best deal for financing medical equipment doesn't stop at choosing the lender or lessor. It also involves negotiating a fair equipment price, residual, and other terms in the contract.

Get a Competitive Advantage by Leasing Equipment
By: Kent Harlan | 01/08/2007 | Finance
Purchasing equipment for your business with cash or getting a loan through a bank can erode working capital that could be used for expansion. Leasing is often a more viable solution for equipment acquisition.

Starting a New Business Requires Planning in All Areas
By: Kent Harlan | 01/08/2007 | Non-Fiction
Many entrepreneurs have failed in their new ventures, not because they didn't have a solid understanding of the business, but because they didn't allot significant planning in every area. A blueprint for success must be developed for operations, marketing, financial, and sales departments.

Utilizing a Financial Broker Can Save Time and Money
By: Kent Harlan | 31/07/2007 | Non-Fiction
When a company has a need for equipment leasing, accounts receivable factoring, an asset based loan, or any other form of alternative financing, hiring an experienced financial broker can yield optimal results.

Leasing Gives Providers a Way to Acquire Medical Equipment
By: Kent Harlan | 31/07/2007 | Finance
Leasing gives today's healthcare provider a way to acquire the latest in medical equipment technology. Patients are demanding to be diagnosed and treated by high-tech equipment. Healthcare providers must meet this demand or be faced with possible business failure.

Factoring Medical Receivables Provides Cash Flow
By: Kent Harlan | 31/07/2007 | Non-Fiction
For independent physicians or medical groups, medical receivables factoring can be a source of much-needed working capital. Factoring third party receivables allows the provider to maintain a stable flow of cash, as well as meet current obligations in a timely manner.

Creating Financial Stability for Healthcare Providers
By: Kent Harlan | 31/07/2007 | Non-Fiction
The healthcare industry is at a crossroads. While patients expect and demand to be treated with the latest in technology, providers are struggling to be able to afford new equipment.

Purchase Order Funding Provides Instant Cash from Invoices and Contracts
By: Kent Harlan | 31/07/2007 | Non-Fiction
Purchase order funding can be the answer to those companies with insufficient capital to produce pending orders. PO Funding provides the cash flow necessary for materials, labor, and related overhead.

Article Categories

Article Marketing

Article Notepad

Stop Duplicate Content

Term Papers

Need Help?

Sign up for our email newsletter

Receive updates, enter your email below

Use of this web site constitutes acceptance of the Terms Of Use and Privacy Policy | User published content is licensed under a Creative Commons License.
Copyright © 2005-2008 Free Articles by ArticlesBase.com, All rights reserved. (0.26, 17)

Using Invoice Factoring to Grow Your Business

Article Comments

Related Articles

Got a Question? Ask.

Latest Non-Fiction Articles

More from Kent Harlan

Need Help?

Site Links

Webmasters

Business Info

Sign up for our email newsletter