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Accounts Receivable Factoring: A Perfect Cash Flow Solution For Any Business

accounts receivable factoringAccounts Receivable Factoring is an option that is recently becoming much more attractive to a variety of businesses. Because it has become more complicated than ever to qualify for a bank loan, companies are being forced to search out alternative financing methods, sometimes to stay afloat.

Invoice (receivables) factoring is much easier than bank financing, and this happens very quickly. In the majority of cases, most transactions can be completed within seven days, some in as little as 24 hours.

Improve Cash Flow

Using Accounts Receivable Factoring is a great way to improve the cash flow of your business. Companies that are low on capital can use their receivables accounts to earn money. Instead of waiting for their clients to pay their invoices, they can sell them to a factoring company for immediate cash.

Factors will buy account receivable and purchase order accounts. They will be doing so at a discounted price, typically for 10% to 30% less than their full value. This money is given to the company right away and can be used for whatever the business needs. This might include paying personnel, paying for rent, purchasing supplies, etc.

There are several advantages to this particular cash flow solution.

  • Accounts Receivable Factoring will not be requiring any debt.
  • A solution that is offering a different option for businesses to get money extremely fast.
  • This is not dependent upon the credit history of the company or how long they have been in business.
  • It can be incredibly stressful; in fact, nearly impossible for a business to qualify for a bank loan if they have poor credit and are not already established.

Today, it is much harder than in the past to qualify for a loan, even those businesses that do have good credit and have been around for some time. It is merely indicative of the times. Companies that choose to participate in accounts receivable factoring won’t have to worry about either.

What is essential to a Factor is the credit history of a business’ clients. Their clients must have excellent credit because this increases the likelihood that they will be repaid.

Realizing that your business has a cash flow problem, you may want to consider accounts receivable factoring. The process is a straightforward one.

A business will sell its outstanding invoices to a Factor. The factor purchases them for between 70% and 90% of their full value. The Factor will then be collecting the invoices. All of the money that they have collected will be given back to the original owner of the invoice, minus the Factor’s fees and the money they initially purchased the invoices for. This allows the business in trouble to generate capital faster. Also, this allows the Factor to earn money, via fees, for coming to the rescue.

Both parties will benefit a great deal with such a situation. The company with the cash flow problem can raise money without debt or a bank loan. This makes for an excellent small business financing solution.

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