Learn Accounts Receivable Factoring

 ACCOUNTS RECEIVABLE FACTORING

We offer answers to most of the questions and concerns on account receivable factoring, also called invoice factoring and receivables factoring.

To learn receivables factoring, you will need to have an open mind. Do not think that accountS receivable factoring is a loan. It is  the selling of interest in a business' invoices or receivables to a private investor, or factor, at a small discount. Account Receivables (A/R) factoring provides over $200 Billion dollars to the Industry each year. In fact, factoring is a centuries old financial service used by multi-billion dollar corporations that is now available to smaller sized businesses, to whom banks are usually reluctant to lend funds. Receivables financing fills a tremendous void.

The invoices to your company's customers for goods delivered or services rendered can be converted into a "Credit Line" from which you may draw cash to better manage your business. Draw only as much as you need and pay only for what you use.

Approval is based on the credit worthiness of your client. If you are the company obtaining factoring money, you don't be concerned about being turned down because of your credit status. Even if you have had a bankruptcy, tax liens or slow pays, you can get you funded through investors within 5 to 10 working days provided your customers are approved for funding. 

Receivables factoring helps you manage the swings in cash flow by getting you your money now; and creating a line of credit based on your receivables rather than waiting 30, 45 or 60 days. Your suppliers get paid quickly, so that you can negotiate the best pricing. In many instances, the ability to take discounts and get better pricing will make up for the cost of factoring.

The difference between advance funding with a private investor and a bank loan is that in factoring you use your customer’s credit line as leverage, not yours. A bank loan is based only on your assets and the ability to repay the loan . When you factor, there is no loan to repay.  Your growth potential is based on your credit worthy customers and it is virtually unlimited. The more credit worthy customers you sell the higher your credit line becomes.

Generally most companies that are approved for factoring services receive in the neighborhood of 70% 85% of their accounts receivables within a few days of being approved for factoring. When the invoice is actually paid the factoring company will pay the final percentage after it has taken out the fees associated with the transaction. Most of the time percentages are in this range, but the actual number depends on many variables.

One question that people ask is how long does the factoring process takes and what do they have to do to get the process started. Well, in general, the time span depends on the company that is offering factoring services. Some companies are able to receive funding within a week and a half and others might take up to a month or longer. Usually the later is the exception.

What are the benefits of accounts receivables factoring? The main benefit of factoring is of course is cash flow. We all know that cash flow is the key to success in any company. A good cash flow means you can make your company grow, pay off debt, take on new business, add equipment, buildings or personel and many other things. You also don't have to worry with credit checks and collections. The funding company does this for you. You can take advantage of suppliers discounts. This is just a few of the many advantages.

If your company has a cash flow problem, accounts receivables factoring might just be the answer to your problems.

If you have a question or concern about this subject or where you can find top rated funding companies, just e-mail us at adm@learnreceivablesfactoring.com and we will respond with an answer quickly.

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