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There is a problem that many companies face: lack of cash makes it difficult to progress to the next level. However, accounts receivable factoring can provide a viable solution for virtually any type of business.
This billion dollar industry is a popular option for businesses that want to accelerate their cash flow. Accounts receivable factoring allows you to have quick access to capital, instead of waiting 30 to 60 days to receive payments of customers. Selling accounts can generate instant cash advances that you can put to good use for your business. You can spend money on something you choose, including payroll, taxes, equipment and inventory.
With accounts receivable factoring, you essentially liquidate outstanding invoices to the factoring company in return for immediate working capital. The company buys bills image less than face value, and then collects the total amount later when the cover is due. In fact, you avoid the time associated with handling their own collections -. Not to mention the hassle and expense of dealing with bad debts
Receivables Factoring is a feasible alternative to traditional financing such as loans, credit lines and credit cards. And it is ideal for smaller and / or less well established companies who may not be able to qualify for loans. Unlike with traditional financing, approval of accounts receivable factoring is not subject to the creditworthiness of the company. Instead, it depends on financial stability and payment history of your customers
Here are some other reasons for receivables factoring is a viable source of funding :.
– Access – Individual approval process makes possible for qualifying companies that are small, young and even those with a history of liens and bankruptcy
-. Control – You control how much accounts receivable to a factor, when and for what Customers
-. Predictability – You can when you get customer payments based on terms with factoring business. This can lead to a “smoother” cash cycle
-. Debt avoided -. No debt incurred, so there are no monthly payments to make
– Flexibility – The added cash flow can help you offer better terms to large customers, as well as offering instant credit guarantees for new customers -. which can increase sales
– Saving – You can pay suppliers faster and enjoy the discount for early payment of
Who should capitalize Receivables Factoring?
with all the benefits that case, the appeal fee to limit factors is quite obvious. But how can you be sure invoice factoring can provide the right fit for your company? Generally, if you pay for labor or materials before receiving payment from customers, companies can benefit from factoring.
Specifically suitable for standard payment factors need that there are no existing primary liens on your accounts. Also, customers must be sturdy and have a positive history of paying bills. Otherwise Accounts factors can be the answer for you if:
– business your cash flow is stressed by long cycles billing
– You can not get a bank loan approval due to lack. longevity, profitability, assets and personal guarantees
-. You can increase sales by enhancing the terms new and larger customer
The Receivables Factoring process
The receivables factoring process is relatively simple. First, you fill out an application and provide factoring company all the necessary information about your business and accounts. Keep in mind that each factoring company chooses different types of customers. Some want to work with companies with annual revenues of at least a million dollars; others like to deal with a company making as little as $ 5,000 a month. In addition, some factors companies specialize by region or industry.
Next factoring company does its due diligence and prepares all the necessary legal paperwork. This step can take anywhere from five to 10 working days. After you have established a partnership with the factoring company, the hardest part is done.
Then you simply prepare customer invoices and then send them to the company to get instant cash. The factoring company will bill customers and follow up to ensure the receipt of payment, handling all accounting, billing and other responsible payment processing.
If all goes out of your account, you can get cash advance where 70 to 90 percent of the value of the purchased accounts. Once customers have made their payments directly to the factoring company, you must send the “unadvanced” amount of the account, though financing charge. (Some aspects of maintaining customer accounts similar revolving credit accounts. In this case, the available funds will change with the number of accounts receivable outstanding, with interest charged on the daily average balance.)
Conveyor | rslugjöld for accounts receivable factors vary from company to company. But usually, accounts aspects fees range from three to five percent of the invoice value. And the fee can actually be as low as 1 percent, depending on the quality of the accounts and the level of risk. It is important to note that the charges assessed by the factoring company is usually more than what you would pay for short-term commercial loans. Therefore, it is most useful to use accounts receivable factoring to generate quick cash, not as a source of long term financing.
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