I beg your pardon. What exactly is Accounts Receivable Factoring?
Accounts receivable factoring is the selling of outstanding accounts receivables at a discount to a factor that assumes the risk associated the receivables and provides immediate cash to your business. The amount cash obtained is dependent on the quality of the accounts receivable. The advance can range anywhere from 70% to 95%.
An owner in today’s complex world of tight credit and expensive money might find navigating small business financing options worrisome. How do you go about selecting which financial tool is right for your company when banks are turning off the spigot of working capital loans?
Let’s Count the Benefits to Accounts Receivable Factoring.
Delegation of Collection Duties
A factoring company will supply your company with immediate cash in addition to handling the processing and collection of outstanding accounts receivables. Outsourcing this strenuous task enables a small to medium-sized business to focus their role solely on acquiring and taking care of customers. Most owners today are focused on selling only products and services are advantaged and successful.
Unlock the Vault: Access Working Capital NOW!
Recent start-ups and fast growing companies find themselves month end and month out in a peculiar situation. Working capital stored away 30, 45 and even up to plus 60 days in outstanding invoices. This business capital could be harnessed for a plethora of business activities from payroll, marketing, and overall business expansion.
Fast Approval Process
Traditional small business financing requires three year financial performance records and additional support profitability statements. This requirement that business owners use personal and business guarantees with other collateral is not only burdensome but could take up to six months to be approved.
Accounts receivable factoring is a quick process. A company can receive working capital within 24 hours after submitting its outstanding invoices and other required documentation requested by the factor. A major advantage is the cost associated with factoring is typically less than 3% depending upon various risk.
Before you sell owners should Ask Themselves
- Is the sale of my accounts receivable mainly for the purpose of addressing outstanding with vendors, suppliers, expenditures or capitalizing on a business opportunity?
- Is the injection of more capital at this time sound and consistent with the overall business plan?
- Have you talk with if necessary an advisor and explored several business financing alternatives?
Increasing cash flow and generating working capital sufficient to operate a successful company does not happen overnight. The skill necessary to accomplish both of these tasks begins with contacting an factoring service with the experience of working in difficult markets and a fundamental understanding of how North American businesses prioritize and delegate capital and credit needs in regards to accounts receivable factoring.