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When business owners Realize They have a cash flow problem and start looking for
Ways to Solve it, the first thing They usually do is call Their banker or the SBA.
The second thing is discoverable They do all the financial and credit information They Will
have to Provide and how many weeks or months it Will take to find out if They are
Approved.
Bankers Decide what business a qualifier for by the value of the assets They own and
Can use as collateral. Many businesses do not have Many assets, therefore the loan or
line of credit They qualify for is not what They need. Even a business with Many
assets Oftel can not Borrow as much as They need to keep everything running
smoothly on a continual basis.
Funds available through factoring are unlimited Actually, in the sense thatthey are
based on how much business you do and how much you Can do in the future. The
assets you use as collateral are the accounts Receivable you generate for goods or
services you have Already Delivered. That means the Amount You Can Get Each
month Depends on the Amount of work you Delivered the previous month.
In order to qualify for a bank loan, you have to be in business long enough to
establishments good credit and show financial statements That Will Allow the banker to
Feel That You Can repay the loan out of your company Profits.
If you have not been in business very long, are in Chapter 11 or have tax liens, you
would not be Approved for a bank loan but you would probably qualify for factoring,
if your Customers are creditworthy. The most Important thing is a factor considers
the financial strength of your Customers.
Factors need basic financial information about you and your company. Once the
factors see your A / R aging report and get the names, addresses and phone numbers
of your customers, They do credit checks and make the decisionmaking based on That
information. They Will verify That the goods or services invoiced That you were
Actually Delivered and accepted by your customer.
The factor Advances you 70% -90% of the invoice and then Waits for your customer
to pay. When the bill is Paid, you’ll get the rest of the money except for the small
fee (2% -5%), the factor charges for this service.
There are Many Ways you’ll make up the cost of factoring. By having your money in
your own bank account almost as soon as you send the invoice, you could save
more than the Amount of the fee with Discounts from your Suppliers. When you pay
on delivery, you also make your Suppliers happy and get better service from a theme.
You’ll gain more than that by being expandable to go after and accept more jobs. If you
know that you Will Be Paid When You send Each invoice, you Will feel confident When
large orders or new Customers come in and will not have to hesitate, wondering if you
shouldnt accept themself.
Languages You can keep up with Payroll, insurance and taxes When you do not have to worry
about When You will be paid for the jobs you do.
There Will Be less stress in your life too. Maybe this is the best part. Maybe it is
priceless.
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