Sometimes referred to as Accounts Receivable Financing.
Factoring is Your No – Debt Solution to your business Cash Flow Problems.
Commonly known as Factoring, Accounts Receivable (AR) Financing is one
of the oldest types of commercial financing.
In simple terms, it is a process that entails the selling of receivables or
outstanding invoices at a markdown to a specialized Factoring or
Finance Company- normally called “the Factor”.
The Factoring Company assumes the risks on the receivable and in return
issues your business with a quick & reliable, most needed influx of cash.
The amount value issued on the receivable largely depends on the “age” and
quality of the receivable.
Accounts Receivable Financing (A/R financing), sometimes known as a
ledgered line of credit or Invoice Financing, is a great solution for businesses
that need more funding that is not available from traditional lenders.
Many Clients need additional cash flow to support their seasonal demands,
growth of their business, new opportunities, or to solve a short – term cash
Benefits of Invoice Factoring
Fast Access to Working Capital
Factoring is a quick and easy method of accessing working capital with funds
provided within 24 – 48 hours on approved invoices. Initial account setup typically
averages less than 7 days from receipt of a Factoring application.
Cash Flow Without Debt
Factoring is always a purchase and sale transaction and not a loan.
Because of this, it doesn’t add to the liabilities on a business balance sheet making other forms of financing such as (inventory, real estate, equipment,) more accessible.
Factoring contracts are typically for a year or less with modest monthly minimums
required. With most Factors, you may choose which invoices you want to factor
each week and additionally, a Factoring Facility will automatically grow with a
business as sales increase.
Modest Fee Rates
Fees will vary based on volume and customer creditworthiness but overall,
Factoring fees have dropped markedly over the last 25 years with today’s 30 day
fee rate often lower than accepting a credit card.
Factoring companies don’t dictate how you spend the funds. While most who
employ Factoring do so to grow their business, some use the new liquidity to fund
retirement programs, buyout partners, buy new equipment or pay off debt.
Relieve Payroll Stress
Factoring eliminates the need to chase checks and customer payments.
With Factoring, a business can comfortably make payroll and pay bills without
incurring late fees, penalties, or damaging it’s credit.
Increase Sales and Profits
Factoring is commonly used to increase profits and fund growth. With Factoring,
a business can take advantage of early payment discounts from suppliers, increase
available inventory for seasonal sales, and even add additional marketing staff.
Minimal Financial Required
Unlike traditional bank loan requirements, the credit of a business or its owner is of secondary nature to a Factor.
The Factoring Company looks to the credit strength of the customers of a
business (as they are the ones paying the invoice).
With Factoring, you not only start building your business through
Factoring Financing with OPM (other people’s money), but also OPC
(other people’s credit).
Increase Sales by Extending Terms to Customers
Extending payment terms to customers is one of the most proven methods of
increasing sales for a small business.
With the extension of 30 – 60 day payment terms for goods and services,
customers will often increase their purchase size as well as their purchase
frequency, confident in their ability to sell the ordered goods within the
30 – 60 terms and easily pay the invoice with receipts from their sales.
Accounts Receivable Management
A business can save salaries and back office expenses with the professional accounting and collections services which are part of any factoring arrangement.
Factoring Companies will provide monthly statements of accounts to all customers, daily aging reports to clients, accounts to all customers, and expert collections services on past due invoices.
Unlike traditional business loan providers that may force you into an endless debt cycle with fees and interest, Invoice Factoring companies simply pay you for your unpaid invoices and then collect from your customer.
There’s nothing to pay back because you haven’t borrowed anything.
Think of it as an advance.
Experience the Difference with Invoice Factoring
Because Accounts Receivable Financing allows companies to receive funding on their outstanding invoices it is a powerful tool that helps funding on their outstanding invoices businesses, both large and small, avoid cash flow problems and provides them with resources to achieve business growth.
When choosing an Accounts Receivable Financing Provider for your business, it is important to learn more about their rates and ensure that their fees are not too high.
You need to also make sure that you understand how much you are being paid upfront.
A company using Accounts Receivable Financing commits some, or all, of its outstanding invoices to a Factor for early payment, in return for a fee.
• No Need for Collateral: Factoring is a type of unsecured business
financing option that does not require any collateral in the form of
assets and guarantors because your invoices which you sell to the
Factor take the place of any need of collateral.
• Factoring is never a Loan.
• Retain Ownership of Your Business.
• This type of financing – Factoring also known as Accounts Receivable Financing does not require you to give away any part of your business to acquire financing.
You always retain complete ownership of your business.
An Accounts Receivable Finance Company can help you with processing
your invoices and billing.
Credit access has become so tight, especially to small businesses with many
traditional lenders unwilling to offer viable help.
Accounts Receivable Financing can help businesses overcome those
The Accounts Receivable Financing process will free up valuable time and
allow you to do what you do best, you can concentrate on providing
outstanding service to your customers and generate new business.
Receivables Management is proven to shorten payment turnaround time,
which in turn, ensures better cash flow.
Receivables Management reduces interest expense making your business
It also facilitates increased communication with your customers in a positive
and professional manner, thus allowing you to stay on top of damaged goods,
lost shipments, misplaced or disputed invoices, or keeping payments current.
And, because this form of financing allows you to access more cash as your
business grows, or less if you need less, you can ask the Factor to either ramp
up financing , or scale back financing as you deem what is the best financial
need for your business.
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