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Return To Factoring Article Archive   How to Grow Your Working Capital Through Factoring - In Less Than 48 Hours! By Linda Bayko Having immediate access to convenient, cost-effective working capital can be a challenge for many businesses. One of the many options available to your business is Factoring. It has been a well-established form of business financing, with its origins dating back to the days of the Roman Empire or even earlier. In the U.S., Factoring goes back approximately 200 years to the early nineteenth century. Factoring is suitable for companies in any industry who sell to other businesses or to the government sector. This is an ideal solution for companies ranging from the Startups, who don\'t yet qualify for bank financing, to the well established companies, who want to take their business to the next level. Factoring provides financial support for growth, to manage upswings in business, or to cover day-to-day operating expenses. What is Factoring? Factoring is a creative funding option where you sell your company\'s invoices or accounts receivables to a 3rd party usually known as a Funder or Factoring company. This financial solution offers flexibility and is a "No Debt" solution. As a result, this type of financing will not show up as a Liability on your balance sheet. Funding approval is based on your customer\'s credit worthiness rather than on your financial strength and stability. Factoring is a very simple process. Here is an example: Let\'s say you have an invoice for $10,000 Once you have been through the set up process with a funder, you can usually receive quick cash advances within 24 hours of you submitting an invoice for processing. Typically, you will get 80 % of the invoice value or $8000 upfront. That leaves a reserve of $2000. A notice is sent to the customer that the invoice is now payable to the funding company. The remaining amount is paid to you after your client pays the invoice minus a pre-negotiated discount fee. Simply put, factoring is no different than if you had given your customer a discount for paying within 10 days instead of 30 or more days! There is no need to be worried about how your customers will feel about this. Many companies are already using this option themselves. If Wal-Mart, Coca Cola and Motorola approve of this type of financing, why shouldn\'t you? If you feel your customer would be unfamiliar with the concept, the funding company will send a letter to your customer explaining that they have been hired by you to handle your receivables. They would also add that by hiring an outside company to handle the receivables it allows your company to focus on growth and most importantly continue to support the customer as it has in the past. What can you use the cash for? You can use the cash for whatever you want. There are no restrictions The Factoring companies do not care what you spent the money on (if you used Venture Capital funding they will tell you what you can or cannot spend it on). To provide the working capital needed to grow your business To handle new projects. You will be able to fill large orders and pay creditors on time or even early. It keeps your cash flow running smoothly during your business growth period. Just think how great it will be to stop worrying about finances. You will be able to concentrate on increasing productivity and expanding your business. Some other important Benefits of Factoring are: The application or setup fees are minimal. Many funding companies do not charge a setup fee at all. If you used bank financing for a line of credit, there would not only be setup fees, but also standby fees for when you are not using your line of credit. It gives you quick access to working capital instead of waiting on your customer to get paid. There is no minimum to the amount of funding you are required to take as an advance by the funding company. You choose which invoices you want to finance. Factoring also can help you avoid wasting time tracking down accounts receivable or handling bad debts. (The funding company does that for you) The big advantage to you is that you get your money within 24 - 48 hours. Just think about it. You are using the good credit of your clients to release your own assets back to you. How great is that? Different ways you can factor your Invoices: You can do partial funding of an invoice to raise only the amount of working capital that you need. (That way you won\'t be paying discount fees on funds that you really didn\'t need in the first place). Most funding companies will even allow you to buy back or replace aging invoices to minimize the discount fees. Another option is to do invoice batching of several small invoices and treat them as one large invoice in order to save money on the fees. Invoice splitting is a process used to accommodate progress payments or partial payments. Many contractors and builders use this option. Factoring is only one option to help grow your working capital. There are many other creative financing options available to a business. Over the years I have counted at least 60 different ways to raise working capital. I only wish I had known about them earlier. About the Author: Linda Bayko is a Certified Cash Flow Consultant (CCFC) and a member of the American Cash Flow Association. She has been doing business finance consulting for over 25 years. Her company, Titeline Funding Solutions finds solutions to fund B2B and B2G businesses. To subscribe for FREE articles on Growing Working Capital, visit her website: http://www.titelinefunding.com and submit a request. keywords: working capital | factoring | funding | financing | business loan | venture capital Capital For Business

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