Every business that has substantial credit clients is bound to experience regular shortage of ready funds, when it is required the most. If you are one such business owner, then it is not possible to run to the nearest bank to arrange for a loan every time you face a cash crunch.

A better mode of arranging finance to overcome any shortfall is to go in for business factoring. This is a very simple method of receiving cash payments against your credit invoices. A business factoring company simply ‘buys’ your credit invoice, after you have issued it to your client. The company then proceeds to wire the amount of that invoice into your bank account within 1 or 2 days after deducting their factoring fee that usually falls in the range of 1.5% to 5% of the value of the invoice based on certain factors.

But, although this features definitely helps you to overcome your cash flow problems instantly, this flexible tool offers much more than just money. Business factoring offers you a choice of either joining up for recourse financing or non-recourse financing. While recourse factoring would be cheaper for you, it would mean that in case your client delayed your payment or even failed to make the payment, the risk would lie on your head. In non-recourse factoring, your factoring company would assume the entire responsibility of collecting the payment from your client. The charges would be on the higher side, but you will simply have to forget about your collection worries, once you have issued the invoice in your client’s name and sold it to your factoring company. So, in addition to providing you money, business factoring can also free your mind from collection worries and this move will also save a lot of time, which can then be spent in increasing your sales.

A business factoring company also checks the credibility of your credit customers, in order to set the factoring fee level. This could again prove to be a boon for you, since you would be able to check the risk factors associated with supplying to a particular client. The fact that you are getting your money instantly would not only enable you to meet your routine expenses without any problem, but it would also boost your confidence to carry out your expansion plans without worrying about finance. In case you enter into a non recourse agreement then your collection aspect would also become much more professional, since the factoring company would be able to concentrate more on collections than you would, since their earnings depend on faster collections, whereas you might be too distracted by the other aspects of your business to put in the required energy for effective collections. Over a period of time, you would also manage to build up a good relationship with your factoring company and this would help both your businesses to grow together and complement each other.

Thus, business factoring not only opens the flood gates for an increased cash flow, but also takes over your collection operations, and frees your mind from the unwanted job of asking for your money, while also providing you with enough confidence to implement your expansion plans. Business factoring therefore offers you an entire financial and mental package to quickly take your business on a new level.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Account Receivables Collection

Any small to medium business growing at a fast pace requires a steady bank balance at all times mainly for salaries, payments to suppliers and even expansions.

If you have a fast growing business with a gross profit margin of above 15 percent and you require ready funds to increase your business, then you could be better off taking the services of a factoring company.

When you sell to your customer on credit, then you have to issue a sales invoice. You will then have to wait for 30 to 60 days depending on the credit period to receive that amount. This means that your money is blocked for that particular time and more if your customers delay the payment. When you have many pending invoices, you make a receivables statement, which is a list of all the pending invoices for which payment is yet to be received.

Receivables factoring is the process by which a third party, i.e. a factoring company buys your pending invoices and pays you the invoice amount minus a factoring fee in 2 installments. The first installment, usually 60 to 90 percent is paid within a day or two to your account electronically, and the balance amount minus the factoring fee, normally 1.5 to 15 percent is paid when your customers pay the invoice amount to the factoring company.

In short, they charge you a small fee for converting your headache to their headache. The advantage you get is multifold. You may have to apply for a loan from a bank to get ready funds, but that would require extensive documentation and time, and you would still have to pay a fixed interest on that loan. In factoring, you pay charges only on the invoice amount, which may go up or down depending on your sales. Or you could go in for capitalist venture funding that could result in interference in running your business. Receivables factoring is not only easy, but it also compliments your business, since the factoring company takes care of collecting payment from your customers as well as maintaining and sending you fresh receivables reports.

The factoring fee depends on some factors like the credit rating of your customers, the length of credit period and the receivables amount generated every month. So, if you are planning to hire a receivables factoring company, you should look at various factors like the factoring fee, the services provided by them, the length of the contract period with them and their overall quality of service in handling your customers. You should look at the quality of service first even if their rates are marginally higher because good relations with your customers are very important.

You can search for factoring companies even on the Internet or you can hire a factoring broker to do the same. The factoring company should be in a comfortable position to handle the volume of your receivables however large or small. Their service and attitude towards customers should be efficient and polite. Factoring brokers can help you to find a matching factoring company for your needs and you may not pay him any brokerage since the factoring company usually does it.

So, these are all the factors you may need to know about receivables factoring and if you do need their services, go for it.



Thanks to Kris Koonar for contributing this article to our Factoring blog:

Factoring Tips

What is Invoice Factoring?

Invoice factoring companies provide businesses in need of instant capital with the funds necessary for them to operate. Invoice factoring is not a loan from the factoring company, instead the factoring company purchases the invoices owed or accounts eceivables from the business. The invoices are sold to the factoring company who then instantly fronts a percentage (typically 65% to 90%) of the money owed. The invoices and account receivables are sent by and paid directly to the factoring company, which then sends the company the remaining amount due, less a small fee for the transaction.

Most businesses opt for invoice factoring, as opposed to a business loan, because the funds provided through invoice factoring are easier to obtain. And since invoice factoring companies base their decision to provide funds on the credit worthiness of the company’s clients, as opposed to the company itself, no debt is added to the company.

There are several advantages to the invoice factoring method. The most important advantage from a business perspective is that there is no delay in the business’ day to day operations or cash flow. On projects that require equipment or other resources for deliverables, invoice factoring allows the work to proceed. Another major advantage to invoice factoring is that the business does not incur any liability in the loan repayment; the clients required to pay the invoices are carefully screened for creditworthiness before the factoring is approved. Therefore it is the responsibility of the factoring company to obtain the payment funds.

From a business perspective, retaining full ownership of the company and not having any future debt to repay is very important when obtaining funds from outside sources. Unlike angel investors or capital venture lenders, with invoice factoring the company does not lose any decision making abilities to the factoring company. The company also does not owe a debt after the funds have been received, as the debt still belongs to the clients that have been invoiced.

Factoring is beneficial to all parties involved. Businesses are able to maintain their cash flow, focus on day-to-day operations and scale their resources as required by the customers; customers receive timely products and services; and the factoring company receives (from the customers) the funds they allocated along with the preset Transaction fee. This win-win-win situation makes Factoring an excellent choice for both small and large businesses alike.

Thanks

Gary

Invoice Factoring Company

www.capitalplus.com



Thanks to Alam for contributing this article to our Factoring blog:

Invoice Discounting

Factoring companies: learn the top seven financial questions to ask and then choose the best one to grow your business the fastest.

A factoring company advances funds to your business based upon the dollar amount of your company’s outstanding account receivables. With a quality factoring firm, you no longer have to wait to receive money owed to you by clients. Each accounts receivable factoring firm may charge different fees, though. Here are the high level questions to ask each company to find the best situation for your firm:

Ask the following questions of your prospective factoring companies:

1. Ask each invoice factoring company how they determine fees to spot the best deal.

The fees that you would pay to accounts receivable factoring companies are based on the financial strength and credit worthiness of your customers. Specifics include:

* How often you bill your customers,

* how long your customers have been in business and

* how quickly your customers pay your invoices.

2. Ask invoice factoring companies for a favorable advance rate and quickly increase your working capital.

When working with a factoring firm, you will submit outstanding invoices to them. They will then provide your business with cash based upon your advance rate. Customary advance rates range from 75% to 90%, which means you would receive between $750 and $900 for each $1,000 of outstanding invoices submitted.

Learn more about how to choose the right factoring company and solve your cash flow management problems.

Now let’s get more detailed; here are a few more to ask to make sure you find the best factoring partner to grow your business.

Ask the following questions of your prospective factoring companies:

3. If an invoice factoring company offers you a flat fee rate, ask about the implications of a flat fee rates and make the right choice for your business.

While flat fees may seem less complicated, the end cost can be substantially higher. With a flat-rate fee, the cost is the same whether the receivable is out for 10 or 60 days so, unless most receivables are out 45-60 days, the overall cost makes this type of rate more expensive.

4. Ask an invoice factoring company these questions about contract terms to avoid costly termination fees:

* Is there a contract term,

* how long would my contract term last,

* is there an early termination fee,

* is my contract automatically renewed if I don’t cancel in writing and

* if so, how much advance notice to cancel do you require?

5. Not all receivables factoring companies are alike: ask potential partners if they work with all clients.

Some receivables factoring companies, for example, will not fund companies with a high concentration, i.e., if their business is dependent upon one or two clients. Other companies do consider clients with concentration and they usually examine risk levels to determine a rate.

Factoring companies: Now let’s get to the nuts and bolts with the final two questions to ask to get the best invoice factoring contract for your company.

Ask the following questions of your prospective factoring companies:

6. Make a savvy financial decision: ask about specific fees charged by receivables factoring companies.

Ask prospective factoring firms about the cost of the:

* Application fee,

* Due diligence fees,

* Credit reporting fees,

* Background or lien search fees,

* Factoring company lock box fees,

* Minimum monthly volume fees,

* Charges to add a new receivables factoring client,

* Early termination fees from receivables factoring contract,

* Upfront advance fee and then an interest fee,

* Fee for same day advances,

* Monitoring fees,

* Automated clearing house (ACH) fees and

* Wiring fees.

Some invoice factoring firms have a flat rate fee that includes all services, except for the monthly Internet access report fee.

7. Ask how factoring companies calculate interest charges and choose the most favorable.

Some factoring firms begin charging interest as soon as an invoice is issued. Under this system, you could end up paying several more days worth of interest than if your factoring company began charging interest on the date you receive funds. Also ask factoring companies if you can select what day of the week to receive your funds and pick what’s best for your company.

Select a quality invoice factoring company now: get immediate funding to grow your business.

Now that you have the tools and knowledge to evaluate factoring companies, you can decide which factoring company will grow your business the fastest. Don’t miss out on lucrative business opportunities because of poor cash flow any longer! Contact companies and get your factoring loans to get growing now.



Thanks to Gage Price for contributing this article to our Factoring blog:

Invoice Discounting

xactly is accounts receivable factoring? Well very simply it is the process of obtaining funds by selling your company’s accounts receivable. To go into a little more detail a company takes the outstanding invoices it is owed and sells them to a third party company called a factor. By doing this the company selling the invoices receives an up front payment on the invoices instead of waiting thirty or more days to be paid. When the invoice does come due the payment is sent to the factor instead of your company. Sounds great right? Well it’s not all roses. If you’re considering going this route you need to be careful. Researching possible factoring companies thoroughly is very important. If you don’t you might pay a pretty hefty price.

Now depending on whom you talk to the accounts receivable factoring business is either the greatest thing since sliced bread or in the neighborhood of borrowing from a loan shark. Each experience is different and some companies are on the up and up while others you won’t want to touch with a ten foot pole.

So you can better understand the experience we’ll walk you through what happens. Now assuming you’ve got a factor you’re intending to work with we’ll start from the point of the sale. You’ve just finished a large project for a customer. You issue your bill to them. The first thing the factor is going to want to see is someone’s signature that shows they were satisfied with the work. But let’s say you sold them a product that was delivered at the dock. A receiving clerk’s signature is not going to cut it. You’re going to need the signature of the person that authorized the purchase to begin with. They are going to need to sign the invoice and probably another document that verifies the purchase was legitimate and they plan to pay for it.

Next you’ll need to fax those documents to the factoring company. But you can’t do this from your office because you might have forged those signatures. No they need to be faxed from the customer’s office. And once the factoring company does receive the documents they may still want to call and verify the purchase. Now if the purchase was for a significant amount of money all this hassle may be worth the trouble but what if the purchase was for a few hundred bucks. Not worth the trouble you say? Well we have a problem with that too.

You see when you first sign up with a factoring company they want to know what companies you do business with. And which of those you want to have the invoices factored. This is because those companies that you decide are worth factoring have to be notified that this is going to be the case. And the factor will want to run a credit check on the company. Your customers will also be notified that they must now send their payments to the factoring company instead of you. This task also will be left up to you. The problem is that if you do not factor an invoice the company you are billing must still send its payment to the factoring company and not to you. This will actually cause that particular payment to take longer than necessary to reach you because it will go to the factor first and they have to release it to you.

Once your invoice has been submitted to the factor from your customer’s location you need to check and make sure it was actually received and there are no problems with it. After the factor receives the invoice it should only take about twenty-four hours to be approved. Most factors have a cut off time each day to receive an invoice if you want to receive your money the next day.

After the factoring company has approved the invoice you will receive a wire transfer to your bank. From there the money is yours to do as you will. Many factoring companies want you to beleive that using accounts receivable factoring is the perfect way to get the money you need to grow your business. The truth is that it is not suitable for many types of businesses. Your billing methods need to be very straight forward to help make factoring work. And it helps if you are issuing fewer invoices but they are worth more money. Otherwise the leg work involved can take you away from what truly matters. And that is focusing on your business.



Thanks to Cash Miller for contributing this article to our Factoring blog:

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