Using accounts receivable factoring fund your company

Finding the right financing solution for a commercial company can be a challenge, even for experienced professionals. Each solution has advantages and disadvantages of financing and know a solution for the distribution is essential. Distribution is the wrong approach can have negative long term consequences for your company, dragging down growth.

A particular problem stems from the sale of products and services to other companies on net 30 terms. This can be a problem because most of the companies has a number of expenses before delivering their products or services. Waiting for an additional 30 to 60 days to pay an increasing gap between the expenditure of funds and the receipt of revenues. This forces the company to dip into reserves to pay for operations. There is no problem with this strategy as long as the company has sufficient reserves. However, the company may run into problems very quickly if the reserves are depleted. It is interesting to note that this can happen from a seemingly positive events, like winning a sale or a large project.

There is a solution of specific funding for this type of problem. It's called accounts receivables factoring and functions by providing your company with a payment fast your network from 30 to 60 excluding bills. The prompt payment reduces, or eliminates, the gap between expenses and revenues. This puts your company on a sound financial basis, providing a platform for growth in sales.

Qualifying for factoring receivables is usually easier to qualify for a small business loan. Most factoring companies are more interested in the quality of your receivables than anything else since it is a guarantee that ensures their transaction. With this approach, small businesses and midsize companies with few assets other than a strong list of customers can usually qualify.

Receivables factoring is integrated quite easily in most companies and operates as follows. Once your company completes the work, you send a copy of the invoice to the factoring company. The factoring company gives you the first down payment on the invoice that is approximately 80% of the nominal value. Once the customer actually pays the invoice, the factoring company puts the second advance, which is the remaining 20% ​​less than the share of funding.

This type of funding is well suited to certain industries. For example, staff, security and transportation companies usually credit factor as a way to ensure you have funds to meet operating expenses.

Invoice factoring has been gaining popularity as an alternative to conventional business loans, especially for a startup, growth and distressed....