Every business depends on steady source of working capital. How to survive waiting thirty, sixty or even more days for you customers to pay, is a tricky question. Besides, collecting outstanding invoices takes time and keeps you distracted while you are trying to focus on your primary business, not to mention how unpleasant can be tracking down overdue invoices and confronting your customers with ill paying discipline. You are determined to concentrate on your business, but the cash is short and cash flow of your business weak. There are always unpredictable expenses in your business and you just can't afford new debt. Perhaps you are thinking about partial sale of the ownership of your company. Don't. There is another manner to put your hands on immediate money without annoying difficulties related to bank loans and complicated paperwork.
It is called factoring receivable and it is a way to maximize the cash flow of your business. It is quick, accessible and flexible. It can arrange money for when your business needs it the fastest and easily. Many companies never see their account receivables in the light of their company's most valuable asset. In fact, there are financial institutions called factor that are interested to buy them, paying you with instantaneous cash. What you get is, at first, immediate advanced amount of all your account receivables sold. The difference, called reserve, is coming to you when your buyers pay total amount of invoices in question, less fee that is associated with the transaction and is determined during negotiating process. Although factor will ask you to show your books openly for thorough inspection, it actually doesn’t care much about your credit score. What are fundamentally interested in are your buyer's paying habits. Unlike traditional bank loaning, factoring is based upon your customer’s creditworthiness, not yours.
Even if your company's credit is not yet established or is poor due to general liquidity crisis or other reasons. The essence of this financial strategy is that it remarkably speeds up the time in which you get the payment, i.e. your money that would eventually come in. It can help tremendously with extended terms of payment that your business partners expect and demand. Yes, factoring is one of the fastest sources of financing, but it comes with some baggage, of course. Expenses can be significant thus considered with required attention. However, the opportunity cost of losing a return on the cash that a business could otherwise invest must be carefully balanced against the costs of factoring. After all, it really isn't a classical bank loan, but an asset based lending.
Via factoring receivable your company can take comparative advantage of supplier volume discounts and early payment. Volume purchases can surely substantially pay back with discounted price, giving you additional room in your calculation for factoring expenses. Without worrying about off balance sheet, as it is not a loan and it doesn't represent no debt for your company. Besides, if you choose your factoring receivable partner carefully, it will act as your account receivable department, managing not only your sales ledger, but the entire process related to your receivables. Just performing follow-up on your late payments can be well worth some additional expenses, not to mention reliable credit checking services on your existent and new customers, simplifying and improving your decisions what terms to offer. Decide deliberate for factoring receivable company with impeccable reputation, well known as professional, fair institution and never ask for less than having your best interests at heart. After all, what else can be better for your factor than what is best for you?
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