Invoice Factoring: A Quick Solution to Cash Flow Shortage

Invoice FactoringInvoice factoring is a really good option for companies looking to generate cash. It allows them to do so quickly, regardless of how many years they have been in business or their credit score. This form of corporate financing is available to just about any company that has customers with good credit and who owe them money in the form of outstanding invoices. These invoices can be sold to companies, called Factors, for fast cash. Capital can be generated in as little as 24 hours and generally no longer than 7 days. This is incredibly quick and much faster than alternative options commonly used, such as bank financing.

Most businesses will require some form of external capital in order to survive or grow. In many cases, this would include the use of a bank loan. Bank loans have traditionally been fairly difficult to secure. This is even truer today. The poor economy has made it nearly impossible for many companies to qualify for a loan. However, the need for money hasn’t diminished. Instead, there are more companies than ever, unsure about their futures because they are finding it difficult to come up with the capital necessary to keep themselves operating. This is not a reason for hopelessness. In many cases, just creative financing. Invoice factoring is a great alternative that many businesses either don’t know about or haven’t tried.

A company interested in factoring invoices will find that the process is fairly simple. It includes them selling their outstanding invoices (or receivables) at a discounted rate to a Factor, who will usually purchase them for between 70% and 90% of their full value. The credit history of a company’s clients will have a lot to do with how much a Factor is willing to pay. The Factor’s own financial standing and access to funds will also influence the price they offer. After they purchase the invoices, all clients will be instructed to send their payments to the Factor. They will act as a collection agency of sorts, accepting payments, even writing and calling customers if necessary.

After the collection all of the invoices, the Factor will return all monies to the company that originally owned them. Dependent upon the arrangement, they might also return the money as it comes in. The exact amount returned will not include the Factor’s fees or the money already paid to the company during the initial purchase of the invoices.

Factoring invoices is a very good option for businesses with an interest in creative, commercial financing. For most companies, bank loans are no longer an option. Banks are simply refusing to loan businesses and individuals, for that matter money. This, of course, is not uniformly true. There are some people and companies able to qualify for bank loans. This has become extremely tough to do so and those without A-1 credit will have a very hard time. Fortunately, there are still ways for businesses to secure much-needed funds. Invoice factoring is one of them.

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